Does your company keep its promises? Are you sure?
While speaking to a group of business leaders about creative ways to improve shareholder value, I had an exciting and humorous experience.
Amongst the various topics that I addressed during my presentation, including the impact of discounting and how much volume needs to be sold to offset the loss of profit. (I had them work through the calculation, and most were shocked to learn the result).
When I addressed the topic of cash flow, a participant commented that he had a constant battle collecting accounts receivable in a timely manner. A few heads nodding in agreement.
An idea came to mind, and I asked this question.
“How many of you would risk losing your paycheck in favor of your client with the promise that the client could keep your paycheck if they did not receive the product or services that was promised?”
There was a deathly silence for a few moments, and then someone said:
“ARE YOU KIDDING ME?”
Someone started laughing, and before I knew it, everyone was laughing.
After the laughter settled down I asked this question:
“If you were so certain that your organization consistently delivered what was promised, do you believe that you would earn the right [in most cases], to charge premium prices and that there would be a decent likelihood that you could collect monies owing to you in a timely fashion?”
After some hesitation, a few hands were raised followed by almost everyone in the room. (It came as no surprise that there were a few who still needed some convincing).
My response: “Then why don’t you just do it”?
The group stared at me like a deer looking at headlights.
My point was this.
While it may appear that many of the businesses in the room suffered from many problems (discounting, decreased profits, lack of cash flow, etc.), their issues, for the most part, boil down to only one issue. Just deliver according to your promise, and many of your problems will go away.
This may be very simple, but I didn’t say it would be easy.
- Work with your people to identify and fix the bottlenecks that stop the organizations from delivering what is promised. (Cause & Effect)
- Educate your people to understand the financial implications of not performing according to your commitment (Impact on resources, profits, and cash flow)
- Create incentives that will influence the right decisions
BTW, I have worked with companies around the world and have proven, over and over again, this works.