Archive for the ‘Leadership’ Category

Help New Young Employees When They Make a Mistake

May 6, 2011

by Doug Smith, President, The Woodhaven Group, LLC

As a 30 year CEO, I truly believe that employees always want to do the right thing and not make a mistake.

I also remember as a young new employee many years ago that I believed I would be fired if I made a mistake of any kind.

Well, mistakes happen.

And they are probably going to happen more often with new young untested employees.  And, yes, these mistakes may have a short-term negative impact on your business cash flow.

If there are not some mistakes being made then the new employee is probably not learning and growing.  I don’t want an employee who is so afraid of making a mistake that they are unwilling to attempt anything new.  That is not how superstars in your company are developed.

Here are tips on working with new young employees that will benefit both them and your company:

  1. Make sure they clearly understand the job description of what they are to do.
  2. Give them solid initial and ongoing training in their scope of work.  Make sure there is plenty of time  for them to ask questions and follow-up questions.  Don’t just have them look at an online video and call that training.
  3. Make it clear they will be accountable for the results of their actions. Most top performers want to be held accountable.
  4. Assign someone to work closely with them.  Call this a mentor if you want.
  5. Proact by setting a time each week to let them ask questions regarding areas they do not understand or are having a problem with.  Don’t wait for the employee to come to you.
  6. When a mistake occurs ask them to go thru the steps or process and if they would do anything differently.
  7. Make sure they have victories to celebrate.  When there is a success let them get the credit.  That is part of being accountable.
  8. Add more responsibility as they earn it. Otherwise, what are victories for?
  9. Through all the steps make sure you listen to what the new young employee is actually saying and not what you may think they are saying. Read between the lines if  you have to.  
  10. When the new young employee becomes a success let them mentor their own new employee.

Retaining employees, reducing mistakes, and building teamwork will be obvious by happy customers, increased sales, and more cash flow to grow your business.

Now, go hire your next superstar.

Use Top Performers for Recruitment of More Talent

May 5, 2011

by Doug Smith, President, The Woodhaven Group, LLC

Nothing uses up cash flow in a company like the turnover of poor performing employees.

The amount of time and dollars to run ads, interview, train, give exit interviews and start over again can kill a company.

Does this sound familiar?

Need a solution?  Try this suggestion.

Tap into your top performers to help recruit others.  It is common knowledge that winners do not like to hangout with losers.  Your best people will know others who are friends, acquaintances from prior companies, or maybe someone they went to school with that will be a success in your company like they are.

You can reward the top performer with a cash bonus, a trip, extra time off, or some other perk that motivates them.  Just make sure you tie the incentive to the new employee being with the company for a certain period of time like 3 months.

So the next time you are looking for someone, keep your superstars in mind and conserve cash flow.

9 Tips to Improve Yourself and Your Business

May 2, 2011

by Doug Smith, President, The Woodhaven Group, LLC.

As an owner or key person in management you must grow your business and increase the cash flow needed to achieve the goals of the company.

I have found most owners do a good job of addressing both the short and long-term needs of the company.

However, there is one area that usually does not get addressed. That is the failure of the key person to take care of himself.  If the top person does not take care of himself then the success of the company is in jeopardy. I know.  I have been there and learned a few tips I want to share:

  1. Maintain good mental health:  It is too easy to get fixated on day-to-day crisis management.  At some point this can affect your ability to focus and solve problems.  The best solution I have found is to have friends outside the business that you can use to unwind with.  It might be a weekly golf outing or attending a ballgame.
  2. Maintain good physical health:  This means exercise.  Not only will exercise help keep the blood pressure in line, it will also help alleviate stress.  The best way to exercise is to treat it like a meeting.  Schedule it into your day at least 3 times per week.  Also, don’t forget that annual checkup.
  3. Educate yourself:  This can be on business or nonbusiness topics.  If nothing else, we all can spend time staying current on how the latest developments in internet marketing affect our sales!
  4. Pay yourself first:  You deserve to make a fair return on your time, effort and risk that you are taking.  Pay yourself enough dollars that you have money left over to spend on something frivolous for you or your family.
  5. Set aside dollars for the long-term:  Make sure you are allocating money for the long-term needs of your family such as retirement or that vacation home.  Your company has long-term goals that need funded.  You should also have personal long-term goals that get addressed.
  6. Stop beating yourself up:  There has not been a CEO or owner yet that is right all the time.  Stop stressing over that past decision that did not work out.  Keep looking to the future.  You will more than make up for old mistakes with the wise decisions you will make going forward.
  7. Hire the best, pay them, and get out of their way:  Do I need to repeat that?  Make your job easy by hiring people better than you are.  That means you will have to pay those key people good money and then do not micro-manage them.  Some of the most fun I have had as a CEO is watching managers develop and being there to help them when they stumble.
  8. Don’t procrastinate! Make the decision:  Failure to make a key decision such as closing a branch or letting someone go can hurt the company, sap cash flow that is needed for projects to grow the company and destroy morale.  For the good of the company, don’t put off doing what has to be done. It goes with the job title.
  9. Ask for help if you need it:  Many owners and CEOs let their pride get in the way.  If you are not getting the results you need ask someone from outside the company to help.  It might be another CEO, a consultant in your industry, or a retired business owner.  They can take a fresh unbiased look at your problem.

Remember, your business can not grow if you are not on top of your game.

Take care of yourself while taking care of your company.

 These tips have worked for me. I would be interested to hear from others who may have tips to add to this list.

4 Unusual Economic Indicators For The Small Business Owner

July 27, 2010

by Doug Smith, President, The Woodhaven Group

Oh, if we could only predict the future!

Every business owner or CEO has certain indicators they use to get a “read” on how their company is performing.  Based upon what those indicators tell the owner, he will adjust strategy going forward.  Business cash flow, profit and net worth depend on the owner making the correct decisions.  I have found most owners do a good job of reacting and making the necessary adjustments.

Unfortunately, all businesses are impacted by changes in the economy over which there is no control.

Should an owner invest in a new product line, open a new branch or cut back overhead in anticipation of rocky economic headwinds?  Those are tough decisions to make.

There are plenty of economic indicators released by the government such as housing starts, consumer price index, unemployment rates, consumer confidence index, and on and on.

They are all important to consider but, sometimes, there is information overload.  Compounding the confusion is when the government “restates” an economic indicator after it is released.

I have tended to include a few indicators of my own that I layer into my decision-making.  I will be the first to say they are not perfect and I do not look at them only in making a final decision, but these indicators do represent dollars spent that are impacting the economy one way or the other.

Here they are:

  1. Freight volumes for truckload carriers.  About 2/3 of the freight in the US economy moves by trucks.  This can be an indicator of inventory levels, consumer spending, manufacturing activity, and overall condition of the economy.  Lots of trucks on the highways is a good thing!
  2. UPS and FedEx shipments.  If the economy is tanking then  overnight shipments of almost anything will drop.  A month to month upward trend from these 2 companies is an indicator things are improving.
  3. Airline travel.  If overall airline travel is increasing that means business people are travelling to sell and close deals.  Even in the era of video conferencing, there is still no substitute for face to face meetings.
  4. Hotel vacancies.  Similar to air travel, hotels operating near capacity can be an indicator of more business occurring, more families vacationing and a bump up in conventions and conferences being attended. 

In my opinion, these 4 indicators are a reflection of how the economy is doing.  A downward trend for a number of months in each would probably cause me to think twice before charging ahead with expansion plans.

I would be interested to hear if you have your own unusual economic indicators that you follow.

Calculate Revenue Per Employee To Increase Productivity And Cash Flow

July 22, 2010

by Doug Smith, President, The Woodhaven Group

If your company is increasing productivity then chances are the cash flow  of your business is also improving.

That is a good thing.

But how do you know if the productivity of your business is showing improvement?

Is there a quick easy way for an owner or CEO to know if the efforts to improve productivity compared to other businesses is working?

Yes there is.  One quick metric that will give the owner a snapshot is Revenue per Employee.  It is simply total revenue or sales divided by the number of employees.  If your company can increase sales while staying at the same employee level then it tells you that  the combined efforts of all employees is having a positive impact on sales growth and probably on cash flow.

Industries differ in the Revenue per Employee calculation that is reported.  Software companies and oil companies can have a high Revenue per Employee while retailers may show a smaller Revenue per Employee.  J. Bryan Scott showed an interesting table right here of 100 companies and their Revenue per Employee totals.

For the owner, it is critical that you define what an employee is.  I have always liked to use full-time equivalents (FTE).  For example, 2 part-time 20 hour employees equal 1 full-time 40 hour employee.  I would define how many hours is a FTE and divide that into total hours  worked.  That is my number of employees.  I take the sales total and divide by the number of employees to get my Revenue per Employee.  Retailers are often a good example of why FTE needs to be used.  Some retailers choose to employ primarily part-time employees while others choose to employ primarily full-time.  Wal Mart probably has a low Revenue per Employee number if they don’t calculate using FTE.

The other caveat is to recognize when comparing to other companies that they may have a high percentage of their work done by outside contractors who are not employees.  As a result, the company will appear very productive because there would be a high Revenue per Employee reported.  I would imagine Microsoft and oil companies like BP or Shell that use a lot of outside contractors will have high Revenue per Employee calculations.  

When it is all said and done, the truest measurement of productivity using Revenue per Employee is to track the trend in your own company.  Is Revenue per Employee going up or down?  Take the best year of sales and profitability in the history of your company and use that year’s Revenue per Employee calculation as a baseline to compare to.  If I had a bad 2nd quarter, I would want to compare the Revenue per Employee back against that baseline year.  Then I would take action to get to my baseline for the next quarter.

If you have an industry association where everyone computes Revenue per Employee the same way, then that becomes a great way to measure how productive your company is.

As an annual goal for my company, I would always challenge my management team with an aggressive improvement in Revenue per Employee.  I know that if I hit the goal then I probably had a great year from a sales, profit and cash flow standpoint.

I would be interested to know if your company has had success using Revenue per Employee as a productivity calculation.

6 Tough Love Cash Management Tips

July 10, 2010

by Doug Smith, President, The Woodhaven Group

Ok, so your business cash flow is in real trouble.

The expected sales increase you anticipated after changing the marketing strategy is not working. I mean it is really not working.

As a small business owner it seems like you are a quarterback operating the 2 minute offense just to get some cash in the door.

What can you do differently to bring in cash?

Well I have walked in your shoes.  It’s not a pretty situation to be in.  Here are tips you can start doing before the sun goes down tonight:

  1. Let everyone know there will be nothing purchased in the company without it first going on a purchase order.  Then you have to personally sign off on the purchase order before it is processed.  If that delays a purchase 24 hours so be it.  Then you as owner sign every check.  Do not delegate this.  By signing checks you will discover who has circumvented the new system.  You will find that unnecessary spending and over spending will stop when everyone knows there will be an audience with you.
  2. Have your management team identify such things as old equipment, old machinery, vehicles not being used, obsolete inventory, and even unused furniture.  Then sell it.  Have a board posted in your office with the items listed and post the money received as each item is sold.
  3. Eliminate all service and maintenance contracts and replace with an hourly fee for service performed.  If your company really needs to cut back temporarily on expenses to generate cash this will do it.  You can always reinstate the service contracts later.
  4. Generate an upfront down payment  on all sales (unless you are a retail store where you get the full amount at the point of sale).  The sales department will balk at this as they will be concerned that a down payment will kill the sale.  It won’t.  Change the commission structure to pay less if  no down payment is received.  The top sales people won’t miss a beat.  They will get the down payment and be an example for the others.
  5. Go to your landlord and negotiate a 10% or more reduction on rent.  In  return offer to extend the term of the lease.  Make sure there is a clause in your lease that allows you to sublet unused space.  
  6. If you own your property or own large equipment then do a sale and leaseback.  Even if you owe on loans, you will convert your equity position into cash.

As an owner of a small business, sleeping at night is a good thing.  Use these 6 tips and take some pressure off of your cash flow position and your nerves.

Consult This Advisory Board To Improve Business Cash Flow

July 6, 2010

by Doug Smith, President, The Woodhaven Group

It can be lonely as the owner of a growing small to medium sized business.  Often a problem or opportunity may come up and as an owner you wished there was someone to bounce ideas off of that really understands your business.

Owners never have enough trusted advisors to turn to that really know what they are talking about and will shoot straight with them.

Oh yes, there are bankers, attorneys, and accountants and most of them mean well but have not run a business and had to meet cash flow deadlines.  The extent of their knowledge of your business and industry is what you have shown them. 

Here is who I have used over the years as an informal advisory board when I needed a second opinion or felt like I needed a fresh idea:  the CEO or National Sales Manager of my top supplier.

If your #1 supplier has done business with you for years then they probably know your company as well as you do.  They may know your industry even better than you.  You need to tap into that knowledge.

Make no mistake, top management at your #1 supplier has a vested interest in you doing well and your company growing it’s marketshare.  They want to help.  They want your business to be successful.

Unlike an attorney or banker, your supplier is in a unique position to observe and understand the trends taking place in your industry.  After all, the CEO and National Sales Manager are meeting with owners like you everyday across the country.  They know the difference between the superstar managers and the B-team.  They see changes happening in real-time. The existence of their own company depends upon the everyday business decisions being made by their clients. They cannot afford for those decisions to be wrong.

I have often used input from these individuals in my decision-making.  A few of the benefits I have gotten from my best suppliers have been:

  • A unique successful promotion I implemented that had worked for another company in a non-competing market in the country.  I did not have to resort to trial and error advertising.
  • Identified which benefits of the supplier’s product got the best results when featured in advertising spots.
  • Personal introduction to owners in other parts of the country similar to my company.  I then successfully developed a mutually beneficial relationship that has lasted over the years.
  • Suggestions for reputable suppliers in other product lines that other owners had used that did not compete with his company.
  • Cost savings ideas he had seen work in other companies that ended up increasing my business cash flow.
  • Marketing channels that were working or not working and why. 

Developing a close relationship with the CEO and top management of your supplier can also work in reverse.  You may find your opinion carrying more  weight when your supplier gets ready to redesign or upgrade the product you purchase.

The next time you have a problem that seems unsolvable, pickup the phone and run it by your #1 supplier.

It can be a win-win situation for both companies.

Slow Economic Recovery Makes Business Cash Flow A Priority

June 30, 2010

by Doug Smith, President, The Woodhaven Group

The economy is not bouncing back as quickly as some expected.  There is confusion and doubt about the path of the economic recovery.  Even the economists that projected a choppy recovery are seeing that the resumption of growth is slower than anticipated.

This means more than ever, it is important for every business of any size to maintain a strong cash flow position.

In my opinion, the facts supporting a continued slow recovery are obvious:

  • Consumer confidence remains mixed at best.  Two different reliable reporting groups  reported May consumer confidence moving in opposite directions.  For many reasons, I believe consumers do not feel good about things now and I don’t see that changing for a while.  The future of the economy is tied directly and indirectly to the feelings of the everyday consumer.  If they are not confident then the consumer will not spend and cash flow of businesses will be impacted.  This important indicator will have to be closely monitored going forward to determine what the real truth is.
  • Housing sales are not showing any upward momentum.  With the government tax credits going  away there are fewer homes being sold.  This decline reverberates throughout the economy.  There will have to be a further drop in prices to trigger an increase in demand.
  • Commercial real estate problems still exist.  Increased vacancies in retail and office space is a reflection of a soft economy.  If businesses do not expand or even reduce in size then they don’t need space.  The landlords holding this space still have mortgages to pay. This problem will still be a front burner issue in 2011.
  • There will be no more government stimulus prior to November 2010 elections. The prior stimulus methods temporarily helped boost the economy.  The political mindset now is to reduce debt.  Going forward,  the private sector has to carry the weight of the recovery by themselves. 
  • The Federal Reserve will not reduce interest rates further.  When it comes to lowering interest the Federal Reserve has done all that it can.  Don’t look for lower rates to further stimulate the economy.
  • The unemployment is still high and will be for the forseeable future.  Government census workers helped boost employment for awhile.  Additional workers will only be hired as business confidence suggests a reason to expect improved revenue over the longer term.  That confidence currently is not there.

So, what should a business be doing?

Here are 7 action steps your company should be doing right now:

  1. Have realistic revenue goals going into the second half of 2010.  Do not gear up for a sales increase that won’t be there.  Your original sales projections for the year may now be outdated.   All other expense areas take their direction from the sales plan so get it as accurate as you can.
  2. Know your business’s breakeven point.  Make sure you operate at or below it.  Failure to do this will consume precious cash flow.
  3. Maintain good relations with key suppliers.  Don’t create surprises for your partners and you will find most of them will be there to help if you need assistance like extending terms.  Do this by communicating how things are going.  It helps your suppliers plan for the future too.
  4. Do not lose existing customers while attempting to generate new business.  New customers cost more to add than keeping old customers. If you have a zero sum game with the number of customers in  your database this too will eat up cash flow. A tip to keep customers happy is to deliver some type of  added value (ie: free shipping, etc) that may not be expensive to do but is attractive to your customer.
  5. Now is not the time to start new projects.  Keep a cash reserve and add to it if possible.  New opportunities will still exist in the future.  Make sure you are there to capitalize on them.
  6. Keep marketing costs in line with revised sales projections.  Do not assume that by increasing the marketing budget that more sales will automatically follow.  Don’t stop marketing but invest dollars in marketing channels that are proven.
  7. Keep gross margin in line.  Do this by making sure you are priced to make a profit.  That does not prevent you from running a short-term promotion that might temporarily decrease gross margin percentage but increase gross margin dollars.

A positive:   Banks appear to be adding fewer reserves for bad loans than before.  This will increase earnings and should start freeing up money to lend to consumers and businesses. This will be one source of cash flow that well run businesses will need in order to grow going forward.

Make sure your business model and financials are in good shape to access this cash from your bank as it becomes available.

Cash flow is the lifeblood of any business, especially in uncertain times.  Make sure you are protecting it.

13 Foolproof Steps To Delivering Superior Customer Service

June 25, 2010

by Doug Smith, President, The Woodhaven Group

If a goal of your company is to increase the sales, business cash flow and net worth for shareholders, then superior customer service has to be at the center of everything you do.

Your business can have cutting edge technology at the best price.  The structure and funding of your company can allow you to scale the enterprise quickly.  Your business plan can be the envy of venture capitalists and angel investors.  Your start-up may have been listed last year on the Inc. Magazine’s Top 500 fastest growing companies. 

In spite of that, if your customer service is not the best it can be then nothing else matters.  Your company will lose marketshare.

In speaking with companies of all sizes from many various industry groups, I find most saying that the difference in their own company from the competition is their customer service.  Really?  I find myself wondering if these companies really know what superior customer means.

From the corner office to the front lines it is time for all companies to step back from the day-to-day operations and ask themselves what superior customer service means, what does it look like, and how do they deliver that unique trait to their customers.

Here are 13 foolproof steps to delivering superior customer service.  Ask yourself if your company is doing the following:

  1. Listening To Your Customer:  It all begins here.  You may think that you have the world’s best value proposition, product, service,and employees.  But does your customer or prospect agree?  Ongoing feedback on how your company is doing is critical and the only opinion that counts belongs to your customer. Feedback may be from a customer forum on your website, a live person taking calls or some other method .  Review the information discovered at a meeting of top management.  A characteristic I have noticed of successful companies is that the customer is discussed frequently at management meetings.  Unfortunately that does not happen enough in most companies.  The simplest and most effective feedback process I have ever seen belongs to Nordstrom department stores.  They have a half page with horizontal lines.  Across the top it says “I would like to hear from you”.  Thats it.  As a result, Nordstrom gets their customer’s top of mind opinion without being distracted by a series of survey questions.  The comments may be positive or negative but I am sure management reads every one of them.
  2. Timeliness Of Replies:  None of us has enough time in our day to get done what needs to get accomplished.  Your customer is the same way.  When they ask a question, request a quote or have a problem you must respond as quickly as possible even if you do not have the answer.  Anything less screams to your customer that they are not a priority to you.  With email and voice mail available, there is no excuse for not getting back as soon as possible.  Have a process in place to measure the timeliness of replies.
  3. Maintain A Good Reputation:  Is your business the first one the consumer thinks of when they need a solution to a problem or need a desire fulfilled?  If you are a restaurant, are you the first choice where to dine for the weekend?  Are you the plumber at the top of everyone’s list when a leak occurs?  A good reputation is not just a result of superior customer service.  Your mother was right about reputation.  Make sure you maintain a good reputation whether it is on consumer forums, with the Better Business Bureau, or at the corner coffee shop in the morning.
  4. Always Be Professional:  No one has to do business with your company.  Show respect in everything you do.  Make sure all employees act and look like they want to earn your customer’s business.  The business environment is no place  for bad language, off-color jokes or an arrogant attitude.  It is  not a secret that people want to do business with other people they like and respect.  The most expensive advertising campaign can be off set by one  employee needlessly making a prospect feel uncomfortable.
  5. Stay  In Touch:  Don’t be like the insurance agent I once had.  The only time I saw him was when it was time for the renewal.  Especially in business to business relationship,  an occasional phone call asking how sales are going is appreciated.  Even better is if you can refer a prospect to your client that might turn into a sale.  Nurture the relationship.  It will pay big dividends.
  6. Show You Are A Team:  Have you had an experience with a company where you wondered if one department within  a company even knew that another department existed?  Or, someone could not help because “that is not my job.”  A reflection of a well run company that delivers superior customer is a consistency throughout the organization in meeting the needs and wishes of every customer.  Make sure your line of communication and processes are in place and there is a synergistic approach to serving the customer.
  7. Don’t Rationalize:  No one is perfect, especially businesses.  Mistakes happen.  When they do occur, admit it and put in place a solution that will make the customer satisfied.  Most customers are understanding.  They just do not want to battle for a solution when the fault is not theres.
  8. Don’t Prejudge:  Every customer, every client, every prospect should be treated as if it’s the only one the company will ever have.  Some of the finest restaurants in America do a great job of making sure each visitor has an unforgettable experience.  That is why some of these establishments have been around for 50 years or more.  Too often, in some businesses, the way a prospect dresses or the size of the company dictates the quality of service given.  Don’t ever let the culture of your company go in this direction.
  9. Does The Business Give Back To The Community:  Superior service does not stop at the doorstep of the customer.  Contributing to the improvement in the daily life of a customer and its employees is indirectly an example of superior service.  Donating services or dollars to worthy causes that helps the community will be recognized and appreciated by both customers and prospects alike.  Many a business has lost out on a sale because a prospect remembered that a competitor contributed to a local worthy cause.  Think of this as customer service and not a line item called “donation expense” on a financial statement.
  10. Are You There For Your Customer In Tough Times:  As individuals and businesses, we all go through tough periods in our lives.  Only then do we really know who our friends are.  You may have a client who unexpectedly loses their largest customer, has a catastrophic fire or suffers the untimely loss of a key executive.  Helping out may be nothing more than extending payment terms for a period of time to help your customer’s cash flow.  I have even seen a company loan an executive to help the client transition through a loss of management.  Gestures like this are never forgotten.
  11. Is Your Product Or Service Easy To Use:  Was the solution to your customer’s problem created by engineers with no thought given to the end-user?  The problem gets solved but a PhD is required to get through the instruction manual.  Superior customer service dictates that usage of the product should be effortless.  I recently reviewed a new CRM system that was promoted as being the latest and best way to manage the interactions with customers and prospects.  It worked.  I could not understand how to use it, so I passed on buying it.  Keep it simple and your customer will be asking how they can buy more of what you are offering.
  12. Do Something Unexpected:  Sometimes superior customer service happens when someone goes out of their way to satisfy the customer by doing something totally unexpected.  This one event may solidify the customer relationship for life.  I know.  It happened to me.  I took my Lexus into the dealership for a routine service and told them I needed it back that night since we were driving to visit my son at college 700 miles away.  That evening they apologized and said the car was not ready since a part had to be ordered.  All of their loaner cars were being used.  I expressed my concern that I needed my car since we were going to be gone 5 days.  The service manager said, “No problem,” handed the keys to a new Lexus setting in the showroom and said “See you in a week..”  That was superior customer service and totally unexpected.  I don’t know how many cars I have indirectly sold by repeatedly telling that story.  Does your company have similar experiences?  If not, why not?
  13. Take Time To Educate Your Customer:  Your customer is incredibly busy and yet needs to keep up to speed with the changes in their industry.  Your company can perform a valuable service by having an ongoing education program directed to your customer.  It can be in the form of webinars, podcasts or e-newsletters featuring key topics of interest with experts in your specialty.  This is added value to the customer relationship that will be appreciated.       

When your business offers superior customer service you are really telling the customer that you genuinely care about their company and them personally.  It allows your business to better understand your customer and deepen the relationship.  You will find price becomes secondary.  The satisfied customer will become the best marketing tool you have.

Make sure “superior customer service” is more than just words.

Will Telecommuting Increase Business Cash Flow ?

June 24, 2010

by Doug Smith, President, The Woodhaven Group

It seems like business owners and CEOs wake up everyday trying to find a new way to increase business cash flow, productivity and sales.

A tool being used more frequently these days to achieve those goals is telecommuting. 

Telecommuting is the process of an employee working somewhere other than at the office.  Usually this means the employee is working from home.  The increased utilization of the Internet has allowed this alternative workplace to become much more popular.  For many businesses it has turned out to be a win-win situation for both the employer and employee.  The telecommuting employee is typically referred to as a teleworker.

Is it something your company should be doing?

Most researchers and business consultants will advise you that it is the right thing for your company to do.

My answer to that question is that yes, teleworkers are going to become a larger percent of the workforce in the future and your company needs to include them as a part of your employee mix.  However, for the program to be successful, your management team must do their homework first or the concept could fail.  There are benefits and concerns that must be addressed.  Here are just a few of them:

Benefits:

  1. Improved Productivity:  There are university, corporate and government studies that show the teleworker operating out of their home is a more productive employee than the employee in the office.  Reasons often given are fewer interruptions, less stress, and a fresher employee ready to work due to not needing to deal with the issues of commuting  to the office. This may be true but, frankly, I am not sure how much more productive the employee working from home really is. There are distractions at home also.  Laureen Miles Brunelli had interesting comments on this subject in a 2009 blog post on About.com  You can read Laureen’s blog post here.
  2. Less Office  Space Needed:  This can be a real cash flow savings for the company.  Less space needs to be leased, no utility or phone cost, and office and workstations can be eliminated.  Those are all real measurable savings.
  3. Flex Time For the Employee:  A real benefit for the teleworker is the opportunity to utilize flextime in their day.  The day can be broken up allowing the teleworker to take time to address home and family issues and still get the job done.
  4. Can Reach High Quality Candidates:  I have seen individuals with advanced degrees who, due to family commitments, have to stay at home.  Yet they still want to realize their professional ambitions.  If they were required to come to an office this high quality candidate would be lost to the company.
  5. Can Utilize More Part Time Employees:  Depending upon the scope of work, the teleworker may not need to be a full-time employee.  For instance, two 20 hour part-time data entry workers might be the best solution for both the company and the stay at home employee.
  6. Opportunity To Employ Handicapped and Retired Workers:  There are some excellent handicapped workers and retirees who choose not to work in an office environment.  They become a real asset to the company working out of their home office.
  7. Improved Morale:  Studies have shown that teleworkers have  higher morale  than those in the office environment resulting in less turnover.  Not having to commute to and from work would be a morale booster by itself to many workers.
  8. Bad Weather Is a Nonissue:  No problem with snowstorms.  While the regular office may be closed for the day, the telecommuting employee carries on as if nothing happened.
  9. Geographic Location Is Not a Problem:  Working remotely allows the company to hire the best candidate regardless of where they reside.  I once hired a telecommuting employee from 600 miles away because she was the best candidate available.  Also, if the spouse is relocated to another city, your company’s teleworker can follow the spouse and continue on as if no move occurred.  

Concerns:

  1. Lack of Social Interaction:  This might be the biggest concern.  The teleworker operating from home does not participate in the “water cooler” conversations or have the opportunity to have a lively discussion at break time with others about the ball game on TV last night.  There must be a process in place to engage the work at home employee if they are the type that requires a lot of social interaction.  A behavioral analyses of the telecommuting candidate might be a good idea to use during the hiring process.
  2. Can the Worker Stay Focused:  Is the  teleworker self disciplined, organized and have the ability to manage their day?  If not, the productivity issue becomes a concern not a benefit.
  3. Is There Buyin From the Manager:  A work at home employee has to be managed differently than the one down the hall from the manager.  Goal setting with specific measurable results and deadlines is critical.  Managing to results is the way to make the teleworker accountable.
  4. Could There Be a Culture Problem:  Not all jobs are a good fit for the telecommuting program.  If there are employees in the office that perceive the teleworker as a slacker that does not pull their weight, then the productivity concern might shift to those employed in the office.
  5. Promotion May Not Be An Option:  If the employee wants to move quickly up in the organization, then working from home may not give them the opportunity to develop and show off their people management skills.  A manager career path training program might necessitate the employee only being in an office environment.
  6. Security Can Be a Problem:  If the teleworker has access to the company database and confidential documents, it is imperative that steps are in place to protect these valuable assets of the company.  A disgruntled employee working remotely can do serious damage.
  7. Are There Savings In Office Equipment:  If the company reimburses the teleworker for a computer, fax, printer and other office needs then how much savings were actually realized?  In some companies the teleworker uses their own home computer with no reimbursement.
  8. Overtime Can Be An Issue:  A happy productive at home employee can easily surpass 40 hours per week.  While managing to results is good, the company still must be in compliance with all labor laws.  This includes not only overtime but also making sure workmens compensation is paid. 

Incorporating telecommuting into your employee strategy can be a real source of additional business cash flow.

It is just important to do your due diligence to assure yourself that the program will be the success that you expect it to be.