The Key to Effective Delegation: Clear Communication

Male and female coworkers discuss work over a laptop.

Delegating effectively can lift the performance of both you and your company. Strong delegation skills are a vital tool, offering benefits for both the person who delegates and the team member delegated to. However, not all delegation is effective. Here are the common traps and how to avoid them.

Dear CFO,
I keep trying to delegate work to my staff, but they either do it so poorly that it’s easier to do it myself or they ask so many questions that I can’t get anything else done anyway. How can I use better communication for more effective delegation?
– Overwhelmed by Workload in Washington D.C.

Build Your Effective Delegation Skills to Avoid Delegation Traps

It’s easy to fall into what I like to call delegation traps. You may think you’re handing off work with clear instructions, but it’s easy to miscommunicate. Clear communication is the key to avoiding delegation roadblocks. Remember, not all delegation is effective delegation. Part of building your delegation skills is learning how to give clear, concise instructions that set your team members up for success.

Not sure if you need to work on your effective delegation skills? Check out these common delegation traps and see if you’re falling into them.

The Most Common Delegation Traps: Communication Roadblocks

Woman standing in front of her team, moving post-it notes around on a meeting board.

1. Failure to define the project in terms of the SMART goal.

  • The problem: Instructions given are inadequate to complete the project and will likely result in lost time and energy as the project is fixed along the way. This leads to frustration for both parties.  It’s not patronizing to lay out the instructions clearly and if they aren’t clear, it should be no surprise when the team member has additional questions. A negative response from the delegator, in this case, is both demoralizing and unproductive for the team.
  • The fix: Lay out the requirements for the project in a SMART goal format. Follow up with the specifics on responsibilities, levels of authority, reporting and monitoring requirements. Engage the team member in the process and follow through for more effective delegation.

2. Only the dirty jobs get delegated.

  • The problem: You only delegate tedious jobs which are low visibility or just plain boring. The team member may get the impression you perceive these tasks as below you, leading to low morale.
  • The fix: Show the team you are not above any work by completing some of your own tedious tasks. For those delegated, explain the value of each task and recognize although it may not bring a Disney theme park ride to mind, it’s important. This will make the task more palatable for the team member. Effective delegation skills also include recognizing a job well done, team members are more likely to pitch in willingly when they perceive the value to them.

3. Conflicting priorities.

  • The problem: A critical, high visibility project just came up and you need to delegate. Your top team member is best for the job (this, and many others) and you shuffle their pet project to someone else.  In fact, you are always shuffling tasks around; this is damaging the attitude and productivity of your best team members.
  • The fix: Stop doing this! (Just kidding.) Make sure you establish open communication with your employees, encouraging them to bring conflicting priorities to your attention without retribution. When working as an acting Controller in a manufacturing company, I had a very good and hard-working team member who would always get the job done. I wasn’t always aware of what was on her list of priorities, so whenever I assigned or delegated a new project to her, she would simply ask what tasks on her list could get a new priority.  I accepted her process and we worked together to refine priorities and shift tasks.

Blank post-it notes on a board and a woman's hand moving one note.

4. Too little delegation.

  • The problem: You do not know what to delegate or maybe how to delegate effectively, so you keep doing tasks yourself that really should be delegated. Effective delegation skills are good for many reasons: the growth of your team, freeing up your time to help the business grow, and increasing the effectiveness and efficiency of the team by finding the best person for each project.
  • The fix: Make delegation an acceptable management objective by encouraging delegation at all levels of the organization. Train everyone on best practices to develop a set of strong delegation skills in each team member. Enable teams to focus on the higher priorities with regular communication of those priorities.

5. Lack of consistent policies, procedures, and training

  • The problem: Only one person knows how to do it–whatever “it” is. Delegating is hard, even in a growth mode, if you need to start from scratch on the process each time. Up until now, all of the information related to delegation was for a specific outcome such as a project or a report. While several of the traps apply in this scenario, there is a more basic issue in the day-to-day delegation which must be addressed: How can someone step in for your Controller while she takes a vacation if there are no policies to follow? How can you shift work from your accounts payable clerk when you need her on a short project if there are no procedures for his job, nor anyone trained to do it?
  • The fix: Effective delegation skills rely on cultivating flexibility in your team culture as well as following good delegation processes. Cross-train your team members. Setting policies to allow distributed decision making will benefit the entire team.  In the company I ran, the dispatcher had the opportunity to collect past due rents before sending service. We defined what her operating perimeters (delegation) for settling accounts was and I was involved if the customer would not comply.  It eliminated a bottleneck and increased cash flow. Document procedures to assure consistent job performance, accountability and cross-training is beneficial for all jobs. 

6. Forgetting you are accountable too.

  • The problem: Team members think they can use delegation to abdicate responsibility for various policies, procedures, projects, etc. Or, you may be pursuing a big customer and lose track of the day-to-day tasks. Well-trained team members will operate efficiently and, in most cases, get the job completed.  But, it’s important to remember, you can’t delegate accountability.
  • The fix: Team members need to keep you informed whether you like it or not. Your team needs to know you require active approval of the biggest projects, significant changes in policies (those which change a risk scenario), watch financial and operational metrics and schedule regular status meetings to keep a pulse on the business.

Remember, effective delegation skills are a useful tool to strengthen any team. Building on existing skills and helping develop new ones is the key.  Delegation works best in an environment of open and clear communication where team members can give feedback, ask questions and contribute to the final results.  When delegating, remember it is a learning experience and takes practice to implement.

If you happen to fall into any of the traps, you aren’t alone. Tomorrow is a new day and the perfect time to use these tips to improve upon your delegation skills and foster a better, more productive work environment.


SMART Goal Setting Strategies to Hit Your Targets

Do your best practices include strong goal setting strategies? If you want to continue the success of your business, get SMART about goal setting.

Have you brushed up on your goal setting strategies lately? I know it may sound like basic business advice, but time and time again, I work with business owners who are struggling with setting and sticking to goals.

If you’re an entrepreneur, you know how critical it is to set goals regularly, but chances are, you either aren’t sure how to prioritize those goals once they’re set or don’t know how to avoid getting overwhelmed (or bogged down) by all that’s on your plate.

Good goal setting strategies begin with self-assessment. Start by asking yourself a few questions (and being honest with your answers):

  • Do I regularly set attainable goals?
  • Do I review my goals to measure my success?
  • Do I set goals to complete projects within my business?

Most business owners will honestly answer NO to at least one of these questions, but most would like to say they could answer YES to all. It happens to all of us; even if you write down a goal list, you may end up putting it away and never looking at it again. Tucked in the desk drawer of every business owner is a long list of goals they may (or may not) complete.

So how do you successfully set better business goals and, by doing so, achieve them?

Don’t Make a Wish, Set a Goal

Often when business owners set a goal, it looks something like this: Grow my Business.

Business woman looking at a business growth goals chart on a tablet
via Pixabay

On paper, this looks like a great goal, right? It’s what every business owner wants to do. Business growth is critical to your success…but what are the steps you’re going to take to reach this goal? How do you plan to define and measure “growth”? Moreover, how will you know you’ve achieved this goal? Well, you won’t.

This goal is what I call a “business wish.” Yes, we all would like to see our businesses grow, but our true focus should be directed toward the action items and strategic plan. Better goal setting strategies mean outlining the steps required to make your wishes happen.

Think of setting your goals like creating a shopping list. When the cupboard is bare, you start jotting down a list: milk, eggs, bread. Now imagine you show up at the grocery store, pull out your list, and all it says is Go Shopping. The thought is laughable, right? You’d wander around the store trying to remember what you need to buy. If you’re like me, you’d forget half of the items you were supposed to buy and then run to the store again, hours later when your kids are asking for a glass of milk.

Setting a goal like “Go Shopping” is precisely the same as a goal like “Grow my Business”—it doesn’t mean anything without an action plan. Setting a generic goal of any sort wastes time and money, hindering your success. You’re running to the store over and over, and still turning up empty-handed.

Get SMART with Your Goals

You probably didn’t get this far in the business world without a grasp on the concept of SMART goals. Even though many of us are familiar with the SMART goal-setting concept, it bears reviewing—especially if you’re realizing your goal setting strategies need improvement.

SMART is such a commonly used goal-setting tactic because it actually works. In case you can’t recall the acronym, it stands for:

S – Specific
M – Measurable
A – Attainable
R – Relevant
T – Time-Bound

Setting SMART goals means coming up with new ideas and strategies to achieve them
via Pxhere

Setting strong, achievable goals means following this strategy (literally) to the letter. It’s wise because it works. Every goal you set should contain all five of these crucial characteristics. Miss one? You’ll struggle to be successful.

Playing off our example above, here’s how to turn “Grow my Business” into a SMART goal. Most goals need to be broken down into several SMART goals; each mini goal is a step toward your overall objective to grow your business.

Here’s where the rubber meets the road. I’m not going to lie; this isn’t always as easy as it sounds. Keep in mind the cautions of goal setting—don’t overextend yourself. Keep your goals attainable and specific. Your aim here is to be realistic, so you’re going to want to set goals that are easily broken down into prioritized, actionable items that align your entire team. A true confession here, I have trouble with over-commitment and often think I can do more than time allows. Be cautious.

Target Your Targets

Start at the top with your long-term targets and work your way down (or backward, if you prefer to think of it that way). You should set no more than 5 big, long-term targets, each projecting out about 3 to 5 years. These targets are the HUGE stretch goals (yes, sometimes they feel like your wishlist, but they should still be specific).

Perhaps one of your long-term targets for growing your business is to hit $5 million in sales by 2025. This goal is a great business growth target, but now it’s time to work your way down and break it into small steps.

Take the big target stretch goals and come up with 3-5 SMART goals to take you through this year. So, assuming your sales were $1 million this year, if you want to hit your target, your goal might be to double your sales over the next 12 months, increasing to $2 million by next year. Now, how do you get there? Break it down further.

Setting Clear Annual Priorities

Weekly planning is a positive goal setting strategy for business success
via Pxhere

List out the steps you need to take over the next 12 months to successfully complete your goal. Is your team positioned to meet the goal? Does your sales team use a KPI dashboard to track performance? Can you use tools like gamification to motivate your team? Are the proper systems in place to support your goals? What about cash flow?

Look at the health of your entire business today. Where does it need to be in one year for you to complete your goal successfully?

Perhaps you need to update your web content. Do you need to hire more sales associates? Turn these steps into SMART goals as well:

  • Clean up the customer database with a new CRM system by Q2 of this year.
  • Hire a marketing team member, onboard and train by May.
  • Vet content marketing firms and update the website by October.

Set no more than 5 of your annual priorities/initiatives to drive your team’s success in meeting each of your SMART goals. Those goals are then further broken down into quarterly, monthly, and even weekly targets. What should happen this week to put you on track for your timeline? It’s much easier to adjust your path week-to-week when you hit a bump in the road than to panic mid-December when you’re closing your books for the year.

In “Mastering the Rockefeller Habits,” Verne Harnish says your goal setting strategy is as simple as asking, “What do I need to accomplish today to keep this company moving towards its plans at the speed the market demands?”

A quick note about the “speed” element: each industry has a speed at which it must adapt to the market. Apple adapts at a different speed than a mom and pop restaurant, for example. Keep the speed of your industry in mind as you set your pace.

Enlist Your Team

Once you’ve set up your solid annual SMART goals and sketched out your steps, it’s time to enlist the brainpower of your team. Gather your management team (if you’re a larger corporation) or your team of individuals (if you’re a small business). Get your SME’s (Subject Matter Experts) to give their input. As boots on the ground, they’ll offer a great deal of insight into snags you may not anticipate.

Your team will help you identify additional problem areas and potential solutions to fill out those larger annual goals. Maybe improving your credit and collections processes will help you meet long-term cash objectives. Translated into a SMART goal, this looks like “Reduce average A/R days outstanding to 60 days or less for all active customers by Q3.”

There are endless areas and parameters to define your SMART goals. Practically any data point can be used to help measure outcomes. These may include:

  • Inventory days
  • Revenue per employee
  • Liquidity
  • Margins
  • Profitability
  • Customer retention
  • Lead generation
  • Customer complaints
  • Error rates
  • The list goes on…
Enlist your team to help determine metrics to track the success of your goal setting strategies
via Pxhere

The most important factor is measurability. Your team may offer other ideas of metrics to assess the success of your goal outcomes. That’s why getting them involved is so helpful. They know the impediments, and their perspective is valuable. Involving your team will also help you effectively delegate the tasks and action items as you work toward your goal.

Don’t forget: Any action plan you develop must matter to your customer base and needs to drive competitive differentiation. As you gain knowledge and experience in goal-setting strategies, the process will become easier.

It’s also important you aren’t bogged down with analysis paralysis! Use daily/weekly/monthly metrics and quarterly reviews to track success; adjustments can be made as time goes on. Most of these adjustments will involve tweaking and won’t require taking an entirely new direction. However, never ignore significant unexpected changes in the business, industry, or economy. If this occurs, address the problem(s) and re-direct as quickly as possible.

Another word of caution: if you’re in a tenuous financial position, it’s better to plan quick, very low-risk, very high-value victories. Set your SMART goals to match your current fiscal state.

The SMART goal formula can be used company-wide as a project management tool. How often do we rush headfirst into a project without defining our intended outcome? When you run a business, your day-to-day operations are hectic—but think about the time and money you’ll save if you sit down and hash out the details before you get started.

That’s the bottom line: SMART goals save time and money across your business operations, short-term and long-term. You work hard, so work smart with SMART goals.

Featured image and post images licensed via Pxhere and Pixabay.

How CEOs Can Improve Productivity (Without Burning Out)

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.

Moodling and Other Creative Ideation Techniques

Wondering why idea generation is so hard? There are creative ideation techniques you can implement to help boost your brainstorming.

We’ve all hit a creative slump before. Whether you call it writers’ block, a brain freeze, or a roadblock, when it happens, you’re stuck fast.

But in the business world, idea generation is vital to continue growing and innovating within your company. Problem-solving is also the only way to cope when day-to-day challenges crop up. When you reach a stuck point it’s time to employ your most creative ideation techniques.

What is creative ideation in the first place? What is moodling? How will teamwork help you overcome your slump (and as CEO, what if you can’t rely on teamwork to solve the bigger problems)? And what are other creative ideation techniques to help you come up with fresh new ideas?

To answer these questions, we have to start by understanding creativity.

Why is Creativity Often So Hard?

Creativity is often hard, even when creative ideation techniques like group brainstorms are used
By Mathew Henry

If you’ve struggled to come up with new approaches to a business problem, chances are you’ve asked yourself the question more than once: why is it so hard to be creative?

The noted economist John Maynard Keynes stated, “The difficulty lies not so much in developing new ideas as in escaping from old ones.” We often use creative ideation techniques to start the process of escaping from our old ideas because frankly, innovative thinking is hard.

In the 1920’s Jean Piaget, a well-known psychologist theorized on how we use schemas to sort and categorize our world, easing the burden of absorbing the stimuli around us. We quickly draw conclusions within our schema (in other words, how we see the world working).

Schemas help us in many ways. We can quickly walk into a situation and draw fast conclusions about the environment. Our brains tap into our prior experience to assess the situation and decode what’s going on, they lead us to recognize aspects of the scenario we’ve encountered before. They also cause us to overlook or ignore aspects that fall outside of our recognition.

Whether you call it a schema or your operating paradigm, it’s a viewpoint that comes at a cost. These fast conclusions and judgments are hard to change. They lead us to stereotypes. Because we rely on our viewpoints so readily, we often miss information and new opportunities as we fight to hold our world within a comfortable schema. Hence, this myopic view results in the difficulty we experience when it comes to generating innovative ideas. We can’t think outside the box if we’re only aware of what’s inside.

Can we adjust our schema? Of course, but it takes work and deliberate conscientious effort because our schemas are often very deeply ingrained in our thinking. Through learning, exploring, and seeking new experience, we will eventually adjust our schemas. This is often why collaborating and other creative ideation techniques are so valuable when we’re troubleshooting a problem. Working with others helps us broaden our viewpoint.

Team Participation for New Ideas

Encourage your team to engage in creative ideation techniques
By Mathew Henry

If you want to generate new ideas and spur creative thinking, involving multiple collaborators and team members is often a good approach. If your office culture fosters an atmosphere of sharing and working together, this may already be part of your process. If not, you may find you need to open the floor to new ideas.

The classic ideation process is usually approached as a group activity. Active participation is encouraged by operating under the rule of no criticism. Every idea is considered “good” until the evaluation or selection phase.

To shake people loose from their schema, the creative ideation techniques include engaging different senses such as:

  • – Verbal/auditory (brainstorming)
  • – Physical participation (role play, kinesthetics)
  • – Visual (storyboarding, mind mapping)
  • – Writing (brainwriting, free writing)
  • – …Or actively challenging the status quo with pure brain games.

These brain games challenge participants to think differently by making new associations, questioning assumptions, or using data points to generate a new perspective.

Group ideation techniques are effective in a wide range of organizations. Nearly any industry can implement creative ideation techniques to enhance problem-solving and encourage innovation. The group ideation techniques result in many benefits such as:

  • – Active and free-flowing stimulation and association.
  • – Encouraging individuals to build on the ideas of others.
  • – Camaraderie and team building.
  • – Participation of multiple disciplines to broaden perspectives.
  • – A high volume of generated ideas to draw from in the next phase.

Of course, like any business practice, there are drawbacks to group creative ideation techniques. It’s important to be aware of these challenges as a leader, and it’s particularly important to keep these pitfalls in mind as you form groups and plan your approach:

  • – Leaders and more extroverted participants directly or indirectly (and oftentimes unintentionally) influence the flow of ideas.
  • – Groupthink might happen despite or because of the group ideation technique.
  • – The strength of the facilitator might influence the process and the outcome.
  • – The stimuli in the technique does not suit all individuals. (For example, I find it hard to stimulate my ideas with a mind mapping technique.)

Consider offering the opportunity for team members to participate using a self-selected technique individually as well as in the group. In some situations, depending on group dynamics, this customized participation may bring additional ideas to light.

Although there are hundreds of variations of creative ideation techniques, I found “18 Killer Idea Generation Techniques” to be a helpful resource. The post features an overview and explanation of each of the creative ideation techniques.

Generating Creative Ideation at the CEO Level

Oftentimes, it isn’t wise for the CEO to participate in the group ideation, as his or her participation influences outcomes. Additionally, many of the problems you need to solve as the company leader don’t fit the “public” forum of ideation. Those problems are often more challenging to resolve and require time and dedication. As the head of the company, the question becomes when do you even have TIME to think about creative problem-solving?

As CEO, you’re not only in charge of the day-to-day operations of the business. You’re constantly working on the business, as well as in the business. You’re addressing any number of mandates that you, your stakeholders, and the business book of the month espouses. Often expounding on this, busyness is viewed as a badge of honor. Whether this drive is rooted in a Protestant work ethic or has sprouted more recently, we often compete on the state of busyness.

Busyness is rampant in leadership and I personally admit I operated in that mode during much of my career. I would jealously read an article by Richard Branson or see a picture of him enjoying sailing and think that’s NOT my life. I was always busy and didn’t have time to …. (you fill in the blank). It took me quite a while to internalize the concept that busy doesn’t necessarily mean productive or effective. In fact, this constant state of frenzy probably meant I had other failings in delegation, managing my time, and over-committing. Constant busyness limits our time for creative ideation techniques or innovative approaches to problem-solving.

It’s far more beneficial if we approach our business not with an action plan but with moodling. Now admittedly, when I first came across the term, I thought it was a misspelling of “noodling” — but both words capture “go to” methodologies for creative ideation and problem-solving at the executive level. Escaping your old ideas and generating new methodologies are easier if you apply both moodling AND noodling.

What is Moodling and How Does It Boost Creativity?

Moodling is a unique and effective ideation technique that works well in executive settings
By Sarah Pflug

The term moodling was coined in 1938 by author Brenda Ueland to encourage the use of idleness to spark creativity, particularly in writing, but we can apply it to business as well. In fact, moodling is an excellent creative ideation technique, particularly when employed at the executive level.

Moodling involves idly engaging in a pleasurable activity such as sitting on the porch or taking a hike and letting your mind wander. It is typically a solitary creative activity, so you’re unlikely to find a moodling group on MeetUp. Moodling requires you to put aside distractions, be in the moment, unfocused and open for daydreaming. Moodling has no mission or clear cut objective and may not produce any flashes of brilliance.

David Robinson in his article “The Art of Moodling” states, “Moodling (is) constructive idleness. This quiet looking and thinking opens the imagination; we encourage ideas to come to us by being available and receptive. What a wonderful realization! Not only is moodling enjoyable in itself, but it gives us a return in increased creativity—better ideas, whether we translate them into writing, … inventions, or business decisions.”

For some of us, the concept of moodling may prove more challenging and come less naturally. It may, in fact even take deliberate work for us to put down our phone, turn off the podcast, set aside the stack of reading and paperwork, and mute our inbox. Moodling is the counterfoil to the state of busyness many of us embrace so readily.

Sitting idly and allowing myself to daydream hasn’t been in my skillset since childhood… Ah, the memories of messing up my Grandpa’s hayfield, the smell of the hay and the warm sunshine… oh, where was I?

With meaning and value in idleness, maybe now I can stop being jealous of Richard Branson and start following his example as an excellent moodler.

What is Noodling and How Does it Differ from Moodling?

Noodling, on the other hand, is more in my think-style. Chances are, you’re familiar with the term or have heard someone say they’re “noodling something over.”

The term noodling is derived from the slang use of noodle to describe a head or brain. The creative ideation technique of noodling is slightly different from its counterpart, moodling. Noodling is a more active ideation and problem solving technique. It’s a more focused and deliberate approach.

Noodling may mean pondering your problem in an idle or speculative manner or examining the issue from a different perspective. In moodling, you let your mind wander aimlessly and you may or may not stumble on something amazing. In noodling, you loosely focus on a specific idea, concept, or conundrum. I often noodle by putting the problem into my subconscious letting it percolate under the surface, sleeping on it, or giving it a tickle over a couple of days until an answer presents itself.

As you noodle on a problem, keep in mind framing the problem is a significant part of solving it. For example, if you frame a sales growth problem as needing to add another product, you may miss an opportunity for a joint venture offering expansion in another market.

Other Creative Ideation Techniques for Executives

Creative ideation techniques are effective and efficient ways to generate creativity in the workplace
By Mathew Henry

If you have an issue you’re trying to resolve at the executive level, it may not be appropriate fodder for your team brainstorming session. This is often why the job of CEO or President is so isolating and challenging.

Look to your network for assistance when you need to think outside the box. After moodling or noodling on a problem, it’s time to bounce it off a colleague, advisor, or coach. There’s a tendency for CEOs to feel that since the “buck stops here,” you can’t ask for help or discuss challenges with others comfortably. But the insights and perspective from someone outside the situation can prove invaluable. Look for executive roundtables, entrepreneurial affinity groups, or business leadership networks where you tap into outside resources and creative feedback.

It may also be helpful to draw on your previous experience. Look at the way you’ve creatively approached problems in the past. Could any of the methodologies work on your current issue? The problem and solution may differ, but the best approach could be similar.

Ideation and problem solving simply means coming up with ideas and throwing them at the wall to see what sticks. Think of the wildest solution and as many different approaches as possible to start. Amass a collection of ideas and then, in the next phase of problem solving, you will narrow it down and decide what’s a plausible, practical, and even innovative answer to your issue.

Featured image and all post images licensed via Burst.

How to Manage Team Vacation Requests (and Why You Should Approve Them)

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.

Why is it So Tough for CEOs to Unplug from Work?

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.


The Art & Science of Selecting a New System

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.

File Naming Conventions: Best Practices to Save Time (& Money)

Wondering how to set up file naming conventions for your company? Implementing file and folder organization saves your company time and money. Here’s how to organize your business files.
Dear CFO,
I am an accounting manager at small injection molding company. I’m also over the IT administration. Many of our employees complain they can’t find files in the system when they want them, myself included. I also have concerns about the security of some of the files. I am wondering if there are tips for filing best practices in a small company that might make this easier.
Can’t find it, Detroit

That has a familiar ring to it. In the small company I ran, finding files and information was a common problem until we established standard file naming conventions and filing procedures. The search for files and sorting through misinformation cost our company time and money. While establishing file naming conventions and filing procedures didn’t fully eliminate the problem, it did mitigate the costs substantially.

Looking for files is an insidious time waster; some estimates put this cost at $2000 to $6000 per year (and that sounds low to me). The estimated cost doesn’t include the frustration, poor decisions based on less-than-full information, or the reproduction’s variance from the original document.

Creating Folder Naming Conventions

Included in the process of setting up the file structure and file naming conventions is addressing the question of limiting access. We used Windows Small Business Server (now known as Windows Server Essentials) and were able to establish a hierarchical definition of the electronic file structure based on the roles of individuals.

Our directory structure cascaded security like this:

Executive – President only
Finance – President & Finance only
HR – President & Finance only
IT – Above plus outsourced IT
Sales — President, Finance and VP Sales only
Accounting – Above plus Accounting Clerical
Service Provider – Above plus Sales team members
Customer Communications – All team members, including temps and interns

Implementing file naming conventions across your company will save your business tons of time and money wasted on searching for files.
Image via Pixbay

Under each electronic folder were organized various subfolders adapted to our business. We created a clear definition of the types of information in each folder.

Depending on the size of your organization, this filing structure could be adapted to a department head and those under him or her, with filing organized by roles. So, if the Controller had a larger department with Accounts Payable, Accounts Receivable, and Cash Management working under them, the folders would be identified and secured by role.

When deciding on the file structure, consider internal controls, data protection requirements (especially if you are international and covered by GDPR or medical under HIPAA) and the level of transparency your company follows. In my company, most information was distributed on a “need to know” basis, but this may depend on your company culture among other factors.

To define your filing folders, first define what needs storage in the folders and by whom. It’s important to be specific when you create folder names as well. Filing Excel files in a folder called Excel and Word documents in a Word folder is unacceptable. Also, filing under individual names, on C drives, or memory sticks is verboten – keep your electronic files housed in a place where they’re regularly backed up.

A good method of defining the subfolders involves identifying the process-generating data, its form, and appropriate access (whom and how). The size and type of your business will also have an impact on the folder naming methods, as will the sophistication of your systems.

For example, let’s say you run a service company and your dispatcher needs to know if a customer has past due balance. In a sophisticated system, the past due balance might appear in the form of a red light on the screen with an amount to collect. In a smaller system, the dispatcher may have to access the customer’s account to find the past due balance, or to follow up with a copy of the invoice if the customer has further questions. A walk through of the needs in each process helps to frame the requirements.

The system capabilities drive another aspect of the filing. In the invoice example, does the system generating the invoice drop a single file for each day’s billing and simply place the dollar amount in the customer’s account (i.e. no drill-down capabilities to the invoice)? In that case, file the invoices into folders by day or month, not by customer name. If you generate a small number of large invoices manually, you may file them individually into a customer folder.

A word of caution on the folders: one of my bad habits is filing too deep. I used to have a folder with 4 or 5 levels of sub-folders. Unfortunately filing this deep results in misfiled documents, as well as too much “clicking” to get to the file you want. I would suggest instead, you create subfolders no deeper than 3 levels. If you still feel you need more categories, develop a better umbrella category and move the relevant folders to a new main category.

Establishing File Naming Conventions

Establishing file naming conventions requires thought as well. What is the best grouping for files: by date (year, day, month, time), by customer, by address or…? The choices for file groupings are endless. It’s important any files regularly accessed by multiple team members follow the defined file naming conventions.

However, choosing the right file naming conventions accomplishes these objectives:

  • The file naming groups common references together (customer, invoice, legal documents, etc.)
  • The file names are sequentially logical
  • The file naming convention is consistently followed

Grouping Common References Together

File naming conventions are the easiest way to keep track of files and stay organized in your business
Photo via Pxhere

Common references mean items you would commonly seek together. If you were seeking information on a customer account, again depending on your systems and departmental structure, possibilities include:

Where the customer is the most important point of reference:

Customer number_YYMMDD_Name of document (ex INV 556325)
Customer name_YYMMDD_Small claims court lawsuit
Customer number_YYMMDD_Notice of past due account
(Note: this date format is always sortable in date order by year within the customer number of name)

Where the system generates a file for invoices each billing date:


(Note: Even if the invoices were always put in a folder labeled billing, I recommend including a description in the file name; if there is a slip of the “click” the file is still identified as a billing file. If your system generates more than one file on a date, it’s often useful to have the invoice numbers identified on the file. For systems where invoices are stored within the system itself, obviously, there is no need for saving the files in a second location.)

Files for items like invoices for asset purchases depend on the type of business and type of asset. Cars and Trucks may use a VIN number and description, while large pieces of equipment may have serial numbers and descriptions. Furniture, on the other hand, may only require descriptions. In some systems, the invoice for asset purchase attaches to the original transaction within the system.

Larger companies with a high volume of equipment may put asset tags on all the equipment to identify it. Frequently the accounting department maintains the records. A key element of the file identifier is the date purchased, as the date of purchase drives tax reporting.

Examples of Assets by Date:

YYMMDD_Asset number_2Ton Crane
YYMMDD_VIN number_2018 Ford Explorer
YYMMDD_Steelcase Executive Desk

(Note: keep away from naming that might change, such as “Bill’s desk,” or “NE Corner Crane.” If you have multiple cranes or desks, consider tagging those assets)

File Names Are Sequentially Logical

What is the sequence you’ll most like search for: customer by date or date by customer?

Beer vendors, for example, use location as their key – there is always a bar at the location, even though the ownership might change– not the customer. Hence, much of their file naming is conventions include location. Within that file naming convention, there are still variations (12390 Greenfield Rd Waukesha WI or YYMMDD_WI_Waukesha_Greenfield_12390). This type of file naming convention is helpful if, by chance, you need to report all new locations in the state by the city as part of your annual reporting to the BATF.

The File Naming Convention is Consistently Followed

Everyone one needs to follow the rules. Period.

Remember your file naming conventions are only effective if they’re followed by everyone in the company, every time. This may mean you need to delegate responsibility to the department heads or another party who will quickly identify and raise the red flag if file naming starts running off the rails.

While the concept of implementing file naming conventions is somewhat “old school,” it is still a highly effective way to manage your document storage. Following company-wide file naming convention best practices will save you stress and headaches in the long run. The new paradigm of file storage and search that doesn’t rely on file name has cost well-beyond what most small companies are willing to spend.

Featured image via Pixabay. Images licensed for use via Pixabay and Pxhere.

Let’s Talk KPI Basics (Key Performance Indicators)

Trying to understand the basics of key performance indicators? KPIs are a powerful tool to help your company set goals, track and monitor performance, resulting in stronger outcomes.
There is much discussion of key performance indicators: what are KPIs? How to set KPIs? How to organize your dashboard? Let’s clear up some of the confusion as to what KPI means as well as discuss how to choose YOUR key performance indicators for YOUR dashboard.

Key Performance Indicators, or KPIs, are a powerful tool to motivate and measure success. Typically, KPIs are used in business as benchmarks. But the concept of KPIs can be confusing and vague. Today we’ll clear up the confusion and discuss what separates the good KPIs from the bad and the ugly.

KPIs are indicators of performance across your company and are helpful when displayed as reports and graphs to determine if your goals are being met
Image via Pixabay

Let’s start with a definition of Key Performance Indicators: KPIs measure performance success against a goal. Success is typically defined as the achievement of a specific long-term goal, or simply the repetition of a period’s achievement of an operational goal.

So, choosing the KPI that best represents the desired objective requires a deep knowledge of the business and the objectives. A quick report of the status of KPIs is called a dashboard.

Often, dashboards use short-cut visuals to hone in on performance. For example, in a typical dashboard, red might represent a KPI behind by at least 10%; yellow, one falling behind, and green meaning KPI is on/above the target. In sales, individual goal achievement might be visually represented by racehorses (or another icon) staggered, based on the percentage of goal achieved or sales dollars produced.

What Are Good KPI Examples?

Common attributes of a good KPI include:

  • Well-defined, measurable information that is readily available or can be cost-effectively obtained,
  • The KPI measures a factor that has a direct impact on a specific goal or long-term performance,
  • The KPI is effectively communicated throughout the company, cascaded to responsible departments, and
  • You can act on the indicator, holding team members accountable, when performance digresses from the goal

Measure KPIs in context and by that, I mean: define “compared to what?” If the KPI supports a strategic objective or specific goal, how does the KPI compare to that goal? For example, an internal goal of maintaining all accounts receivable under 90 days would then compare the receivables over 90 aging to the goal. Or, if the goal is to increase sales by 10%, then the monthly goals of calls, quotes, and orders expected as compared actual performance would be reflected on the dashboard.

Defining Good Key Performance Indicators

A recent visit I had with the commercial lenders at a local bank underscored the same dilemma I faced when I was running a business. What is a good KPI? With limited resources, how do I identify and track the best KPIs?

In my opinion, every company should track basic metrics:

  • Margin (preferably by product line or in construction, by job) is sales less related costs of goods sold. Measure margin against an industry standard, historical performance or other similar benchmarks. Trends or performance against the industry metrics may indicate pricing or performance issues which need to be addressed.
  • Pipeline means the sales you expect to close. Typically, measure the pipeline against history using the sales funnel (the percentage of quotes that convert to orders). Trends in the pipeline foreshadow future sales.
  • Backlog indicates how many incomplete orders you have now compared to your normal level of outstanding orders. This trend may show future customer discontent or a slowing/improving of your sales.
  • Lead Time is defined as how long it takes to get the customer the product from the time of the order. Compare to historical levels, industry standards, and competitor information.
  • Financial Performance & Ratios Include a series of pertinent financial data and ratios as part of the financial review process. Simply adding a couple of formulas to the monthly financials provides the information. These indicators fall into categories of liquidity, activity, leverage, operating and asset productivity. Measured against industry and historical standards, trends are often the harbingers of what’s to come.

As you establish the Key Performance Indicators, keep in mind when measuring departmental or any other performance, the company must still function as a whole.

Mapping out KPIs with your team can help manage and track team performance and determine how and why goals are or are not being achieved
Image via Pixabay

Incentives and performance integrate across the entire company. If the warehouse manager’s KPI to increase inventory turns results in production shut downs due to lack of materials, you created what’s called a perverse incentive. This could also indicate your warehouse manager is very bad at the job or the tools aren’t in place to manage the inventory properly. In all cases, the KPI gives you an area to address – the incentive; the inventory management; the tools available to measure and manage; and possibly a production issue.

How to Select KPIs for Your Business

KPIs come in all sizes and types and there are hundreds, perhaps thousands of them. How to choose?

Guide your decision by keeping in mind: the availability of data, team member workload, internal dependencies and costs to help focus on the most important tasks at hand. Depending on what fits best with your business, there are several approaches:

  • Simply start with the Company KPI measurements described above to get your feet wet on data collection, reporting, accountability, and response.
  • Select what you believe is your biggest performance issue and look at what drives it. For example, if you decide revenues are too low or falling, contributing factors could be the volume of sales, pricing of sales, ticket size, lack of upselling/cross-selling, customer selection, number of SKUs, the conversion rate of quotes, number of sales calls…and the list goes on. Since you know your business intimately, you can probably select the top one or two items that might move your revenue number, such as, revenue generated by day per construction worker as a benchmark. Decide on and set the realistic goal (historical company information is useful, if available) – another not-so-easy task. Once the goal is set, assign responsibility and start measuring the driver against the goal.
  • Get your CFO or Controller to analyze existing data over time. This data may include trends in margins, revenue per person, or other readily available financial measures to help identify any negative trends. Then select what you believe is the most impactful – similar to above– and address it.
  • If you have an annual plan and/or budget, break down the objectives in the plan into daily, weekly, or monthly goals cascading into the departments that contribute to the success of hitting the target objectives.

Establishing a KPI Dashboard

establish a KPI dashboard to keep clear track of your KPIs and track your progress towards new and better goals
Image via Pixabay

After selecting your KPIs, consolidate them into a dashboard. A dashboard sounds complicated, but it’s simply the place where you put the KPI objectives along with the actual performance. This may be tracked in a physical location or tracked as part of a shared software program used by everyone in the company.

Each level of the organization that has accountability will have a different dashboard with the highest consolidation at the Company level. For example, the sales department will have a dashboard possibly detailing performance by the individual, whereas management will have sales at a summary level that evaluates all of sales performance against the total objectives.

At any time, your dashboard should give you a full picture of where the company stands and where each department is performing based on their goals. The dashboard changes in real time, with regular updates to track performance. It’s important to delegate and assign the responsibility to department heads or other parties to ensure KPIs are regularly monitored, tracked, and reported on the dashboard.

Establishing the RIGHT KPIs is no easy task. It’s important to adjust as you go and select indicators relevant to your company. If you’d like to learn more about KPIs, you can even become KPI certified.

While implementing a KPI system may seem intimidating, it’s best to simply pick an indicator or data point and start. Starting is daunting, but as you get used to the process and your data collection becomes more meaningful, you can refine your business measures. When done correctly KPIs are a powerful tool in your management arsenal and can help you succeed in setting greater goals for your company.

Featured image and all post images licensed for use via Pixabay.

How to Make Inventory Easier on Your Business

Inventory day is a big day for any business. Make inventory easier with these tips on how to better organize and manage the inventory process

Dear CFO,

As the controller in a very small manufacturing company, taking inventory is the worst job in the world (ok, maybe not the worst, but certainly tedious). The process itself is hard, but the reconciliations are even more difficult. My team uses information provided by the shop floor and sometimes I’m not sure if they really counted. What can I do to make inventory easier?

Inventory Not Managed in New England

You aren’t alone in your frustrations. New ERP (enterprise resource planning) systems can make inventory easier with real-time tracking. But keep in mind, these ERP systems are still dependent on good information. You know the old saying – garbage in/garbage out?

During inventory, many of the inputs are usually completed on the floor and not under your direct control, presenting another problem. Senior management must be involved in improving the inventory process. This takes us back to a discussion of policies and procedures. When there are clear policies and procedures with assigned responsibility, there are fewer errors and much less finger pointing.

How to Make Inventory Easier

Recording inventory is a time sensitive project so make sure your whole team is on board and following inventory procedures to make inventory easier
Photo by SparkFun Electronics

At the heart of it, an effective inventory process comes down to effective management. The discussion points below may seem so obvious and rudimentary that you can’t imagine they create problems, but you’d be surprised. So, let’s go through the tasks and resources included in a successful inventory procedure.

Timely and Accurate Recording in the Inventory System

  • Implement a policy stating who can order inventory and how much inventory they can order at a time. The policy should cover the types of materials and the dollar amount each team member has the authority to use when they purchase. If larger amounts of materials, inventory, or supplies are needed, who is responsible for the escalation? Sophisticated systems control spending policies with set dollar limits based on login authority.
  • Record part numbers for all inventoried items, typically called the Item Master. There should be a policy covering who can set up the numbers on new parts in the system, along with the numbering method and a procedure to record it consistently. Properly identify all the characteristics for each part in the inventory system. Characteristics in inventory systems include:
    • costing for purchase and pricing for sale,
    • units of measure for purchase and use/sale,
    • accounts for transactions,
    • descriptions for purchase and sale,
    • various other information related to vendors, serial numbers, bills of material etc.
  • Place purchase orders through the control system. This assures the recording of inventory orders happens under proper authority. Management can easily see open orders that might influence production or cash flow planning. (This is different than costing methods, which is another discussion.)
  • Receive inventory by recording through the system and against purchase orders, simultaneously implementing procedures to resolve short shipments or other issues. This enables accounts payable to process quickly knowing there is authority to pay for the amount ordered and at the price indicated. Make sure all inventory received prior to month end (or inventory date, if different) has the appropriate invoices processed.
  • Use a bill of materials. If your company makes a product repetitively, whether it’s an assembly, manufactured, or you’re running a construction company, identifying the parts used to make it and recording the bill of materials will automatically relieve inventory. In sophisticated systems, the recording is done as the part is processed. In other systems, a manual input may be required to “complete” the recording. Inventory procedures make clear who, what, where, and when to assure consistency.
  • Record all shipments of finished product through the system along with the related billing.

Physical Space Needed for Inventory

Having the proper storage space for your inventory is one way to make inventory easier for all involved
Photo by Pxhere
  • Control high-value items in a secure place to avoid tempting employees to “walk” off with them. For example, when copper is expensive, the copper wire should be locked in a cage. Not all team members should have access to all inventory.
  • Place high-volume items in an easy to reach space, neatly organized. Clearly label inventory locations. Clearly label all parts. This might require a number, description, or barcode. This inventory organization may also require bins, shelves, buckets, and other receptacles. Neatly organize lower volume and bulky items as well. Limit access to the inventory but ensure if someone is looking for a part, they’re able to find the RIGHT part.
  • If using a Kanban or other inventory staging type of process, allocate adequate space for the inventory staging. A corollary is to limit the amount of inventory movement. (I once had a client who lost a full order during production because someone didn’t put it in the right spot. Several months later, they found it.) Over-capacity is also an issue.
  • Segregate obsolete inventory and overstock inventory. Record your obsolete inventory and preferably sell it off. As an auditor, I once identified that based on current usage the client had 300+ years of a certain part. Don’t make this same inventory mistake! If you have consigned inventory, it should also be segregated.
  • Keep the workspace and production areas clear (I realize this is often a more involved process and there is a need to address the various means of getting inventory to where it is needed). Cell manufacturing looks different from production lines and assembly lines.
  • Use min/max capabilities of the inventory system to avoid keeping too much inventory on hand – an expensive proposition.

Implement Proper Cut-Off and Inventory Procedures

  • Pay attention to work in progress. If you have product that doesn’t complete in the measured timeframe, you must identify how much of the process is complete and properly attribute raw materials not yet relieved from inventory.
  • Measure all processes at the same point. Inventory received has an invoice recorded. Manufactured parts bills of material are processed. Shipments bill in the same timeframe as they are shipped.
  • Develop specific inventory procedures for your organization. This sample inventory procedure uses a pre-printed inventory sheet system and may be more complex than your company requires. Often pre-numbered inventory control tags are used.

Make Inventory Easier by Avoiding Garbage In/Garbage Out

Avoid a complicate inventory day with some simple procedures to help make inventory easier on your business and your team
Photo by SparkFun Electronics

If the policies and procedures defined above aren’t followed, taking the physical inventory, identifying and quantifying the differences becomes extremely time-consuming. That’s not to mention the possibility of generating larger book/physical adjustments. Common inventory problems include:

  • Items ordered in different units of measure than used and a system that doesn’t properly reflect the difference. For example, batteries are purchased by the box containing 4 and used individually. So, receiving 1 box isn’t the same as using 1 battery. Most systems will automatically record the conversion if the item master is set up correctly.
  • Variances in inventoried amounts. In less automated systems or where inventory is taken to a job site and the team members report the usage, it’s imperative that the released amount is compared to the used amount. Management must investigate significant variances, as well as make sure the inventory usage is recorded in the same period as it is actually used.
  • Shrink and theft due to poor oversight. Losses are inevitable without physical control of appealing (high-value, readily marketable, or useable) inventory that can “walk” away.
  • Poor inventory setup. Inventory setup is critical to maintaining the proper dollar account balance associated with the items in the physical inventory list. Make sure the pricing of the physical items is done using the same methodology of the general ledger account. If your dollars move in on a FIFO basis and the inventory list prices at average cost, there will be differences.
  • Inventory system settings that are changed too easily. The ease with which smaller accounting systems are changed is a double-edged sword. Setting security settings (somewhat limited in smaller systems) and turning on the audit trail will make it easier to trace who and when a number is changed.
  • Employee burnout. Physical inventories are tedious for everyone involved and as a result, may meet with resentment. Make inventory easier for everyone. Consider using a cycle counting process to count high value or high-volume items more frequently and lower value/volume less frequently. This does depend on systems in place that assure the completeness and accuracy of the inventory accounting. A cycle counting process is a win/win for all involved: if the activity is recorded timely and accurately, there is less work with the physical inventory.

While I have clients who still take a “full” physical every month, most businesses with proper policies, procedures, and oversight are able to limit the process. Inventory is a big job but there are certainly ways to make the inventory count easier for all involved. I hope your team leaders are willing to work with you to get policies and procedures in place as well as encourage compliance.

Featured image by SparkFun Electronics; post images licensed for use via Flickr CC 2.0 and Pxhere Public Domain.