By Ken Keller

Dear Ken Keller,

I was recently was able to provide raises for employees. I heard grumbling that the raises weren’t enough. Sometimes I have to hold my paycheck so my employees are able to cash theirs. Just how much financial information should I share with my employees? I’m feeling a bit resentful.

–Rick J.

Dear Rick:

You are not obligated to share any financial information, but when you don’t say anything about how your company is doing, the rumor mill will run wild and be accepted as the truth because you haven’t done anything to counter the impression employees have created, good or bad.

Go to your bank and get rolls of pennies for every manager. Privately, remove two or three pennies from several rolls and re-seal them. Gather the team and give everyone a roll; have each one dump the pennies out in front of them. Tell them, this money represents one dollar of revenue.

Then, as you share and explain the percentages of actual business expenses, have them count out the pennies them from their pile. Start with salaries, followed by taxes, rent, utilities, benefits (including vacation, holidays and insurance) and include technology and office supplies.

Don’t rush through this. Use a white board or flip chart to keep track; let it sink in how large a percentage each item is.

At this point, tell them to count out how much has been spent so far, and then explain to them that this is the amount of money that the company spends before opening for business.

You should emphasize that a large percentage of the revenue dollars are being spent to have people on the payroll and yet, not one penny of revenue has actually been generated.

Proceed through the remaining expenses. Make this a teaching moment so that the management team gets the feel of what it is like to have to make a decision to pay this bill and not another and what the impact of not paying a bill on time might have on the company.

What your team will discover is that there are very few, if any, pennies little left over after paying for all the expenses. Whatever is left over has to be reinvested when a job has to be redone due to poor quality, replace worn out equipment or to give people raises.

This exercise should lead into a conversation about how everyone can help by reducing unnecessary expenses; taking care of equipment to last longer and by being more efficient.

Through the senses of seeing, touching and hearing, you are explaining the financial realities of your business.

Everyone will likely end up with less than five cents in their stack. Those who came up short at the end of the exercise will say something like “I’m short some pennies.”

You explain it by saying “That is what happens when a customer doesn’t pay our bill. We have to eat the loss. Now what will YOU do?”

Dear Ken Keller:

I want to know you thoughts on having weekly staff meetings.

–Allan F.

Dear Allan,

I’ve never been a big fan of staff meetings only because the purpose of having them is never clearly established.

Is to educate people? Inform people? Make a decision? Announce a decision? Address a challenge of opportunity? Or, a combination of all three?

Is there a published agenda? Does someone keep the conversation focused to avoid sidebars?

Is there a time-keeper to keep the meeting from extending for hours?

Does someone issue the follow-up action items with clearly assigned owners with deadlines?

If you can address these issues before you decide to have a meeting you’ll know if having it is necessary.

By Ken Keller

Dear Ken Keller,

I own a company that markets employee benefits, property and casualty insurance and also services the personal needs of business clients with car, life insurance and homeowner policies.

We pride ourselves on service and in going out of our way to make sure clients get everything they need from us, when they need it.

Recently I scheduled an appointment with a long term client, the owner of a manufacturing company.

When I arrived, I was told the owner was not available and that I was going to be speaking with the owner’s son.

After a few pleasantries, the son told me, “We have outgrown you.”

I did not know what to say in response because this has never happened to me before.

Our meeting ended quickly and as I drove away I asked myself, “What just happened?”

My company is now being phased out. The client is interviewing other insurance brokers, my competitors, to handle their needs going forward.

Do you have any thoughts on preventing this from happening again?

Martin S.

Dear Martin,

This is a good news / bad news situation.

The good news is that the owner’s son told you specifically and directly why they were seeking to do business with another business partner.

The bad news is that somewhere along the way, you (and perhaps others in your company) missed the road signs (clues) that had been put up telling you that something you weren’t going to like was going to happen.

Let me suggest that when a client says “we have outgrown you” it means that you (and / or your company) hasn’t evolved, hasn’t kept abreast of what is happening in the market and perhaps has no idea what is taking place within the client’s organization.

The fact that you only met with the son suggests you are not a genuine Trusted Advisor to the owner.

Perhaps you were at one time a Trusted Advisor but something happened for you to lose that status and since that happened, you were simply seen as being another vendor of services.

Based on what you wrote, the son is now making major decisions in the business and this came as a surprise to you.

Let me share why I think this is.

It is not uncommon in the insurance and other professional services for a great deal of attention to be paid to the client in the beginning of the relationship.

But once the prospect becomes a client, the professional provider turns over day to day interaction to support team members and the connection between decision makers loses its stickiness (glue).

For many reasons, all of them probably good ones, you have drifted away from the relationship you worked so hard initially to gain.

Your client might be fine with the day to day service your company provides but in my opinion, is seeking more strategic help and that is where it has become apparent that you have gone AWOL (absent without leave).

Back to the good news; this event should serve as a wake-up call for you as the owner to take stock of the current state of all of your clients to avoid being surprised with another dismissal.

I recommend sorting your clients using criteria including longevity, total annual premiums, and future business potential highlighted by the last time you personally visited the top decision-maker.

Then, rank and group your clients into categories (A, B, C) and set up a cycle of face to face visits (monthly, quarterly and semi-annually). Calendar these meetings and stick with them. In business, absence does not make the heart grow fonder.

Once you have started having these meetings and providing the counsel and support your clients need from you, it will be time for you to teach everyone else in your company how you want them to take care of your company’s clients.

Dear Ken Keller,

I’ve owned a restaurant for a long time. I thought things would get easier, but the business is getting more difficult.

Summer is the worst. Once school lets out, everyone heads out for vacation, and they don’t come back until August.

The city is also approving more restaurants; many of these are franchises or chains. The city needs the tax revenue. When a new place opens, people flock to it until the “newness” wears off and then folks drift back to us.

Due to the drought, the cost of the food we buy has gone through the roof. I don’t expect those prices to drop anytime soon.

I am feeling pressured by all of these arrows being slung at me by forces out of my control.

I’ve always loved this business and I hate that it has come down to a constant struggle.

My wife is tired of my complaining. What do you recommend?

Doug A.

Answer

Dear Doug;

The first place to start is in your own mind. You must be able to separate what you can control from what you can’t control. Your attitude, altitude and approach is something that only you can alter but only if you chose. The question is: do you really want to quit complaining or has it become your default position?

I am assuming you have a desire to change because you wrote me. Let me address how you “go to war” to get people to visit and spend money at your restaurant.

You start by deciding who is your ideal customer and learning why they choose to be your guess.

Find people who fit your description and ask them to come over to your place and give you their candid opinion of your “offering.” You don’t need to hear “everything is great.” You need to hear the unvarnished truth.

You might need new signage, a thorough top to bottom cleaning, fresh paint, windows washed, bathrooms spiffed up, menu revamping, cooking lessons, staff training; maybe all of the above and more.

This input is given for improvement; don’t push back, take it and start working on implementing the changes.

Start visiting other restaurants that are doing the kind of volume you want. Take notes, ask questions; go at different times of the day and different days of the week. Analyze what works and what doesn’t and what you can apply.

Pay careful attention to food preparation and how it is displayed and to the wait staff. This is where the war is won for the customer dollar in the restaurant business.

You need to be able to create a system to change your prices frequently. Start negotiating with suppliers, find new ones if necessary and trim your menu of seldom sold items, unprofitable items or those that take too long to prepare.

I would increase prices on beverages immediately. Someone paying $8 for a glass of wine is not likely to balk at paying an extra dollar. Coffee and tea are literally gold mines for restaurants.

Analyze day parts when you do the most business and close early or open later when it makes economic sense to do so. If no one comes in after 8pm, why stay open until 10pm?

Near the top of your list should be the gathering of email addresses and other client information (birthdays, anniversaries; frequently ordered items) that you can use to entice visits.

You should have some type of customer loyalty program to increase frequency of customer visits. You can learn about those from visits to your competition.

I would recommend you also take the time to visit the Small Business Administration website. One of the best programs they offer is free advice from consultants at the Small Business Development Centers and through SCORE (Senior Core of Retired Executives).

By Ken Keller

Dear Ken Keller,

I’m a business owner in my mid 50s, working long, hard hours to grow my business.

While I know every aspect of my business, technically, my weak spot is financial management.

I’m just not a “debit and credit” kind of guy and I never have been.

My issue is that my Controller isn’t doing the job I want done or the job I now know needs to be done.

This came to light recently when I attended a conference and learned what kind of reports and analysis other company owners in my industry were receiving from their finance department.

My fellow owners were surprised to learn that I was not getting anything close to what they use to make more informed decisions.

I was told that it only takes a few days for their monthly financial reports to be completed; mine are always several months behind (late).

The other owners explained about separation of duties within accounting and finance to prevent temptation and the likelihood of playing with the numbers.

My Controller has been with me for years and by all accounts, is loyal and hard-working. I have no reason to suspect anything but his total honesty.

I thought he was smart enough and willing to take the initiative to learn new things as the company has grown and expanded but he has not.

What are your thoughts on how to deal with this situation?

Sincerely,

Fred R.

Answer

Dear Fred,

I’d say you have a very serious issue on your hands.

If I did not know better, this employee is out smarting you by playing dumb. But he is playing with your money and maybe he has been doing it for years.

And, since you have admitted that finances aren’t your strong suit, it wouldn’t take much to stay ahead of what you know and are learning to continue to keep you in the dark.

You didn’t say who you use to do your taxes but it is probably past due to bring them in for a “top to bottom” review of everything that is going on in the financial area of your company.

I would recommend a simple exercise to “follow the dollars” to find out what the current process is in your company to make sure every dollar is accounted for.

If you suspect fraud, you can bring in a Certified Fraud Examiner to perform an audit that focuses specifically on theft or opportunities for theft.

If you decide to do either action, I recommend you put your Controller on a paid vacation for at least one week, or longer, until you gain a better understanding of what has been and what has not been going on with your company’s money.

Assuming that this is merely a case of lack of ability, a longer term solution to your dilemma is to hire someone from the outside who has “been there and done that” as your Chief Financial Officer and have your current Controller report to him or her. With someone new at the helm, your frustration should soon disappear and your decision making will likely improve once you start receiving the information you need.

If financial irregularities surface in your company as a result of outside review by competent professionals, they can advise you what the next steps should be to address both personnel and processes.

By Ken Keller

Dear KK:

My company has not performed formal performance appraisals for our employees for several years. Prior to the recession, we used to give raises along with the evaluations.

Because of the poor economic conditions we have not been able to provide raises because we did not have the money. We did not lay anyone off, but we did not hire new people either; if someone left we moved around the workload as best we could.

Maybe our industry recovered later than others, I am not sure. But in the meantime, we have recently lost some good employees to competitors and morale among the remaining employees is not where I want it to be. I believe that happy employees make happy clients.

Things are getting better and we will now be able to give some people increases. But not everyone has earned a raise. How to I deal with this?

Signed, Bill V.

Answer

Many companies are right where you are; they are just now starting to see daylight on profitability.

Don’t think you went through the Great Recession by yourself. I admire that you want to reward those employees who have stuck with you and taken on the extra work to help the company get through the challenging times.

It’s a great thing to share your profits with others who have worked hard to help create them with you.

You need to proceed with caution and understand before you get started, not everyone is going to be happy with the outcome. You will not be able to please everyone and that is just how it is. You may have some sleepless nights and you may even lose some employees before this is over.

The biggest mistake you can make is announcing that the company is giving raises. Everyone will assume they will be getting a large increase after receiving no raise at all for more than a few years.

If you want to provide raises based on seniority (tenure) understand that thinking is outdated. It is also dangerous because it telegraphs to your employees (current and future) that you value tenure over contribution.

Tenure is not loyalty. For some employees, staying with a company for many years means loyalty but only because of the steady paycheck and benefits.

I’ve known employees who contributed more to a company in three years than others did in twenty.

And don’t assume your managers are more deserving of a raise than other employees. Do your best to take into consideration not just the recent past when thinking about whom gets raises, think about the time period since you last were able to give pay increases.

Start by taking a list of all your employees then take each name and place them into one of two columns. The first is the list of those deserving of a raise and the second is the list of those who do not. How do you decide whom goes in which column?

Some employees have made minimal contributions. Those are the employees that have just done enough to keep their job. You may have even considered letting these people go if you were going to reduce your headcount.

Others have contributed more than others, and those names go in the first column.

Go back to the first column and resort it, from highest contributor to lowest. Why? Some people deserve a larger raise in pay than others. Take your budget and allocate it until you feel comfortable that the money has been divided properly based on contributions to your company.

I hope this gives you a good start on the path of providing raises to deserving employees.

By Ken Keller

I don’t recall anyone getting into trouble when I was in elementary school. About the worst thing that could happen to you was the principal calling your home and letting your parents deal with whatever you had done.

In high school there were more serious ramifications for misbehavior. For minor offenses, there was detention, a mind numbing experience.

Transgressions escalated to calls home, a physical paddling by the assistant principal (“swats”), suspension and finally being expelled to another high school.

In the school environment, any adult could call you out for bad behavior with swift judgment and punishment.

These things were part of the “stick” that motivated students to stay on course and obtain the stated objectives; good on-campus behavior, solid attendance and academic achievement.

Most students could see the “carrot” at home, living in a nice house, with utilities, food to eat and a warm, safe place to sleep at night.

The unspoken, ultimate carrot was the hope of realizing an even better life as an adult than your parents enjoyed. That path was revealed as you grew older by role models, living and fictional.

How one achieved the carrot was through study and work on school assignments outside of the academic day, also known as homework.

Progress was measured by your grades. If you were motivated enough, you could address any number of variables impacting your report card. If you were satisfied, you could simply continue doing what you had done.

Post school you went for more schooling or you went directly into the workforce, hopefully having learned the requirements and lessons of success.

These days, there are few sticks in schools as there were before and the carrot(s) don’t seem to be as strong of an influence. No one is to blame for any of this; it is simply how it is.

But if you ask the owner of a business what makes it hard to succeed these days it is when your employees aren’t happy. Unhappy employees don’t serve clients as well as happy employees do.

Unhappy employees are no where near as productive as unhappy employees. Why aren’t your employees happy? They haven’t seen a raise in a long time.

Carrots are missing; in some cases appear to have vanished. Raises are very hard to come by and bonuses are rare. That will not stop employees from asking for a pay increase. They’ll always be asking.

Owners need to be able to explain why a raise isn’t an option. Larger forces may be at work that the employee needs to be educated about, c9mpetition, inflation, mature business conditions, uncertainty, rising costs of being in business.

By Ken Keller

Economist Milton Friedman divided spending into four categories, each one impacting owners, employees, vendors, and organizational culture:

-You spend money on yourself and in doing so you’re interested in buying whatever you want most at the best price.

-You spend your money on other people, and because someone else will be the recipient, you are less invested or interested in pleasing them.

-You spend other peoples’ money on yourself and price is no longer an objection.

-You spend other people’s money on other people, and no one really notices or cares.

Steve owns a business. Even when he struggled in the early days to get his business off the ground, his attitude was that he always deserved the best.

He acquired debt with what others believed to be over-the-top spending, but Steve had always believed he was ultimately the one who should get full credit because it was only due to his efforts that his business was successful.

Even though he said he treasured his clients, in reality he only valued the revenue they generated. Despite his professed love, Steve was always negotiating for higher prices and didn’t cut any deals.

Steve fell into the first category of spending. Not only could he never distinguish between a want and a need, negotiating is how Steve chose live his life. In his mind, everything was negotiable.

Steve wasn’t impacted by the second category, spending his money on others, until the business grew and he was forced to hire employees. These were people that Steve brought on board to take care of ‘His Clients’ (emphasis added).

Steve never had any interest or desire to splurge on his employees. His attitude was that people were replaceable and loyalty was something you bought.

Annual raises were non-existent. Given his tendency to negotiate, Steve waited for employees to approach him about getting a raise and even then, he stalled.

He actually held off doing anything until an employee generated enough courage to ask him a second time about a pay increase.

Steve believed his people were weak because they did not engage to negotiate with him. The raises he did give, he gave grudgingly.

The third category of spending is a rare occurrence, but when there was a windfall of money, such as a rebate from a vendor (something Steve had negotiated), or an unexpected tax refund, he splurged. That largesse, however, never extended to his employees.

Steve took that “found money” and used it for things he would never have spent his own money on. He traveled the world, staying at the finest hotels and eating at the best restaurants, going first-class all the way.

Because Steve was seen as a successful owner, he was approached to run for his local city council and won. At this point, spending category four kicked in, and Steve had no issue at all voting to spend money that wasn’t his for people he didn’t know.

Does Steve’s business make money? Yes. The business is profitable. But this success comes at a price.

Only a few of Steve’s clients like his approach of constant bartering. Vendors like the volume that Steve’s company purchases but they do not enjoy dealing with Steve. When Steve calls or pays a visit, people dread it because the only reason he is there is because he wants something.

As a result, the loyalty, work ethic and care of clients by Steve’s employees extended only to their paycheck and not beyond it.

Employees were disengaged and saw no reason to change their mindset.

The employees that could actually have made Steve’s business better left and those who remained were those who wouldn’t be hired anywhere else.

Steve is not about “win-win” but “Steve must always win.” What a legacy.

By Ken Keller

Harvey Mackay is successful author, speaker and business owner. In his book “Dig Your Well Before You Are Thirsty” he describes in detail how he earned promotions from his first employer.

His first job was managing a broom, and he was assigned the task of sweeping both the production floor and warehouse.

Harvey thought about what it would take to distinguish himself from all of the other employees at the company. He not only wanted to do the right things, he wanted to do things right.

The first thing he did was make sure that he arrived early to work. Harvey knew that by being early he was setting himself apart from others who were competing for a promotion.

Second, he demonstrated a sense of professional and personal responsibility. How did he do this? In his mind he “owned” the cleanliness of the floor that he was assigned.

Because Harvey accepted responsibility for doing a good job, every day, his immediate supervisor didn’t need to micromanage him to make sure that the job was getting done.

That freed up the supervisor to spend time dealing with those who did not have the same work ethic, those who did not understand the concept of “owning the job they were paid to do.”

The third thing he did was to demonstrate enthusiasm for his work. Harvey did this with a strong performance day in and day out, regardless of what else was happening in his life. He did not bring his troubles from home to his job. He did not get caught up in anyone else’s drama. Harvey stayed focused.

Fourth, he learned to become a team player. People have to work together to achieve common goals. Part of being on a team means having to possess, and use, talent, skills and abilities to work with diverse individuals.

Fifth, Harvey understood that forces inside and outside the company would influence change and he would need to adapt or be left behind.

Harvey kept an open mind about how things could be done, avoiding the trap of believing that “this is the way we have always done it.

At one point his supervisor asked him to take on additional responsibilities. Harvey was asked to learn new tasks, to cross train so that when people went on vacation, he could substitute for them. His attitude was that he could never hide behind a job description; his job was what his boss needed him to do.

While having solid communication skills were essential, one skill was paramount: the ability to anticipate what the boss wanted.

Harvey asked his boss what the department’s concerns and issues were. He then presented to his boss solutions to problems that had not been addressed. This ability to think ahead and “look around the corner” for his boss set Harvey apart from just about every employee.

In many organizations, this ability might threaten the supervisor. But that was not the case with Harvey’s boss, who recognized the potential that Harvey had and developed it.

Finally, Harvey understood from that his first day on the job that he could either help his employer make, or save money. He decided that did not want to be a cost, a burden to his employer. He found ways to contribute so that the company could grow even though he was in a low level job that literally anyone could perform.

Why is this important? Within Harvey’s story are many potential questions you can ask prospective employees who seeking employment with your company. Hopefully, you might be able to identify individuals with potential, initiative and a willingness to contribute. Or, perhaps you can use Harvey’s lessons to weed out candidates that may well be a burden on your company before you add them to your payroll.