It’s that time of year when a multitude of awards and trophies are handed out….really, they are earned…rewarded and fought hard for…..The Wanamaker (PGA), the Stanley Cup (hockey), and the Larry O’Brien Trophies were all just lifted skyward over the last few weeks. They were pursued over long and hard-fought seasons and careers by professionals who sometimes had to move from dead last, like The Blues, to reach that teary-eyed moment they could call themselves champs.
When one thinks of being a pro, our mind often turns to athletes who have reached the pinnacle of performance. By that definition, a professional is anyone who makes a living in a field where many are amateurs, and their work is characterized by reaching seemingly unattainable levels of performance while holding to the highest possible technical and ethical standards in that field.
In the world of business, one generally thinks of a professional as someone who has received special training then delivers outs
When you think of business the culture of the goals of business what do you think of money profit power greed crushing the competition look business can be those things sometimes it has to be about those things but the reality is that’s for most of us that want to earn a living without compromising our morals without hurting others to get ahead business is about creating good things for customers it’s about satisfying our employees and our business partners make no mistake business is about making money but you can’t make that money without customers employees and business partners yeah believe it or not business is about making people happy making people comfortable it’s also about learning and growing so you can know how to make people happy and comfortable in the future but remember business is not about achieving one of those things it’s about doing all of them today tomorrow five years from now 20 years from now great business is not about overnight success great business is about indefinite success contrary to what movies may have taught you business is not just about understanding money be successful in business you need to understand people what a customers want how do they want it how can I get more from my employees what kind of company do people respect you need to understand infrastructure buildings roads the internet the legal system you need to understand resources supplies raw materials energy you need quality resources at a good price business is art and these are our paints and our canvas money people and infrastructure that’s the tangible stuff how about the intangible stuff to be successful in business you also need to be aware of what happened yesterday what’s happening right now and how I can use data information and knowledge to make better decisions tomorrow finance accounting sales and marketing supply chain management human resource management information technology instead of thinking of these functions as being about investing selling manufacturing hiring and firing think of them as tools to help you understand and people think of them as data centers think of them as groups of people with knowledge think of them as aids in making decisions that will make people both happy and comfortable wealth power and greed those may be cool words to motivate teenagers that dream about becoming millionaires overnight for the rest of us those that actually work those that want to create a better world those that want to become active members of our global society get ready to learn about real business because by understanding money people information resources and infrastructure by understanding how to make customers happy you’ll have the ability to start and successfully run your own company you’ll be able to the most out of a nonprofit organization you’ll even be able to maximize government’s of value to the community and in the process you will become a valuable resource for any organization making money being profitable that’s the goal of every business but it’s not very easy no matter how big or small companies of every size often struggle to make a profit I’m serious how can that be how can a company not make a profit and still be in business well before we try and answer that question you need to first understand the basics of profit profit is the amount of money left over after a company pays all of its bills profit is calculated using this simple formula revenue minus cost equals profit looks simple but in fact it isn’t that simple formula has so many layers let’s first concentrate on revenue revenue is the amount of money a company collects from its customers cost cost is the sum of all the expenses for a company we need to subtract all of the costs from the revenue it’s a very challenging balancing act every company in every industry is trying their best to tip that scale in the revenue direction there are a couple of ways to do this increasing sales can be tough as a result many companies try and control costs by cutting employee hours and using lower quality materials but by doing that you may a lien eight customers down low your revenues do you see the challenge to grow quickly you need to do things like buy more land open facilities invest in more inventory and hire and train lots of new people that’s a lot of money there cost to constantly grow are very high and so even a few months of good sales may not be enough to make a growing company profitable startup companies often lose money for many years before they start making a profit soon you’ll start to see every story in the news as a signal of profit try right now go to a reputable news site and look at the headlines war on terrorism does that mean lower sales for Airlines does it mean increase sales for a military supplier the price of oil how does that impact the cost of trucking how does it impact the revenue of an oil company child birth rates increase a new cancer drug is approved a massive snowstorm is due hit your part of the country the government passes a new law in each case think about which companies will see changes in revenues and which companies will face changes in their costs making money being profitable that’s what businesses try to do these are the big decisions business executives face on a daily basis in business every decision big and small has an impact decisions can result in consequences we anticipated or they can sometimes take us in directions we never considered impacting things we never imagined as humans most often we tend to first consider how things will impact us individually next we may begin to consider the impact on those we know those we care about and those we have to answer to in business those who will be impacted by the decisions we make they’re called stakeholders and as a business manager it’s your job to consider all known as well as all possible stakeholders customers employees owners investors upper level managers and other fellow employees they’re all stakeholders that always need to be considered considering stakeholders isn’t just about evaluating situations before you make a business decision it may also be the key to influencing your employees or your boss that change could result in a chain reaction of positive outcomes they may not only influence how they feel about the recommended change it may also get them excited about how this relatively small decision could impact them and those around them the key to seeing and evaluating stakeholders is to have a powerful imagination so as you make big decisions today consider the stakeholders who are those that are most likely to be impacted immediately who might be impacted tomorrow next month next year who might be impacted by your decision 10 years from now yeah it might seem strange at first but this is the first step in becoming a visionary business leader what makes you valuable why would someone want to hire you don’t be shy if you don’t take stock of everything going for you you may be wasting something so what makes you valuable you have a special skill perhaps you’re willing to travel can you speak multiple languages perhaps you’re young and energetic or maybe you have experienced that most others don’t have perhaps you have excellent connections you have access to smart and influential people perhaps you have a car these are your personal resources it’s good to know what you have at your disposal because when you set a goal you need to know what you have going for you and you also need to know where you come up short it tells us the resources we lack it tells us what we need to get before we can actually go after our goals companies need to do the same thing very often they have a large collection of people machines buildings and inventory that they can use to work towards their goals and while most of the resources I listed for the company are tangible like people companies must consider their intangible resources what are the intangible resources a company may have available to them perhaps they have a well known and trusted brand name maybe the company is a cool image that customers love perhaps the company has excellent credit or maybe the company is liked and trusted by important government officials like a person no company has everything and like a person companies can make the mistake of miscalculating their resources we’ve all probably thought at some point we had a strength only to find that others were much better than us or perhaps we thought one of our strengths was really valuable only to later find out that no one really cared that we could do a handstand it can be embarrassing when we discover that something we thought was a resource might actually be a weakness or a liability in business being aware of your resources is vital in knowing what you have and knowing what you need it’s critical to know that you have something special something that could differentiate your company from the competition or something that could be used to develop new products or reach new customers knowing your resources is also vital in selling your company’s potential investors and in our cutthroat world where the battle to get talented people to join your company gets more intense each day companies often attract employees by listing all the positive things the company has going for itself basically by listing its most valuable resources and as our world changes at such a rapid pace a company will have a hard time staying competitive if they aren’t aware of what they have and what they lack which of these does your company have any one of these might be the thing your company will need to get an edge any one of these might be the difference between being prepared to change or getting swallowed up by change so let’s first consider your goals what do you want to do do you want to write a book start a tech company do you want to develop a video game now let’s take stock of your resources what are the resources you have at your disposal what are the strange things you have that someone else might not have what are your differentiators then ask yourself what are the things you lack to achieve your goal okay now it’s time to get someone to believe in you if you wanted me to invest in you how would you try and sell me sure having a good idea would be nice but if you didn’t have some valuable resources at your disposal I’d probably feel a little nervous about investing in you to make that idea real resources that’s what makes you valuable so you want start business well what kind of business I’m not talking about what you might make sell or service instead I’m talking about the ownership who will own and run your business let’s go through some of the common forms of business ownership let’s start with a sole proprietorship one owner with all of the management power one owner that can claim all the profits they carry all the risk and get all the rewards but add more owners then we have a partnership each owner is a partner each shares in the profit do all partners run the firm not necessarily a partner that’s active in managing the firm is a general partner a partner that invests money but is otherwise not active in running the company there a limit partner perhaps a partnership wants to grow but they need more cash to expand the present owners can sell some of their shares in the company to investors the company is now a corporation those investors their stockholders therefore they’re the owners and they can easily sell their shares at any time corporations are legal entities in effect they have legal rights just like a person which means the corporation is responsible for anything that might go wrong the investors at worst can only lose the value of their stock but who runs the company for a corporation the owners that is the stock holders they can elect a board of directors that board can choose the top executives in the company but the board of directors cannot influence day-to-day activities in the company what does this mean well to a certain degree in a corporation stockholders own and managers manage there are many other nuances in trying to choose the best ownership model for your organization but hopefully now you know some of the basics associated with the most common ownership models and hopefully you’ll be able to consider the important issues and ask the right questions as you move forward in developing your organization you what are the products you love to buy the ones you love to shop for the ones you research electronics cars furniture or maybe it’s clothes for people that love clothing what makes for a great purchase what would make for a great shirt or dress perhaps it’s the design of the clothing what do you like classic modern outrageous but to be truly great it needs high quality fabrics this is something you’ll want to wear again and again and it’ll need to survive getting washed perhaps you value excellent workmanship solid stitching consistent sizing not all of us have an unlimited clothes budget though so the price will also be important to the customer and the company needs to make a profit so they’ll be concerned with their costs for some of us we want something from a brand we trust or perhaps a brand that others will admire so marketing and branding will be important we can’t visit every store or online retailer we don’t visit every fashion block so the clothing company has to get their clothing so that we can see it so many things need to go right for us to find this one special article of clothing and if they want us to buy from them again and again they’ll need to consistently satisfy us in all of these categories over and over again it’s no wonder that the most successful and progressive global companies value cross-functional teams so while you may expect luxury brands like Coach Chanel Gucci and Prada to be filled with dozens of great designers a real business person understands that a successful company in an industry where creativity and innovation are required a successful company needs cross-functional teams small well managed teams made up of very different people with very different skills so not only does a company like Chanel have great designers but they also have people skilled in marketing purchasing manufacturing finance engineering strategy and probably a number of other areas each of those functional experts brings different skills different problem-solving techniques each is creative in their own way each judges success in a different way this is why companies like Apple Nike and Lexus has such a long track record of success each of these companies values people that understand the importance of product quality innovation design marketing and of course profit as you consider your company its strengths its weaknesses consider the respect and attention paid to all the different functions in your company be sure your company gives a voice to a varied group of leaders they can see mistakes you wouldn’t consider they can also expose you to opportunities you would have never known about long-term success takes a true commitment to cross-functional teams cost quality and speed are all related to company flexibility for example when you buy a car you’re given certain options a vehicle color leather or fabric interior electronics navigation and media options tire options but they don’t ask you the type of battery you want in your car they don’t ask you what kinds of spark plug for your engine they also don’t ask what types of oil and antifreeze to use in your car why well the company is trying to balance a number of things they want to give you choices so the car feels special so the car feels like it’s yours but they can’t let you choose everything because offering the customer choices requires extra time extra inventory and it’s possible the customer really doesn’t care if the company offers you 10 different tire options for one car they would probably need to carry inventory of all 10 tires lots of inventory in low volumes higher per unit prices from the supplier plus your workers now have to become more versatile at the same time when companies offer lots of options customers might be willing to pay a premium to get exactly what they want also when a company offers more options it’s possible to attract a wider market of customers now we have cars for people that like different colors for people that want luxurious leather interiors and also for parents that would rather have cloth interiors that are easier to maintain we also have a car that appeals to people that just want a car with basic stereo options as well as families that want the very best media options for those long trips with the kids so as your company develops new products and services consider all of the possible options which options does the customer value most for each feature how many options will you need to offer and are they willing to pay the premium for that option does that make your market bigger while offering that option deliver a profit at the same time which features our customers to accept s standard standard features are easy to mass-produce if materials are needed you can buy them in bulk for a good price and fewer options might make it easier for a customer decide whether or not they want to purchase your product or service the next time you go anywhere a restaurant a coffee shop the post office the grocery store consider all the choices they let you make consider the ones they don’t and then try and think about how the number of choices impacts their cost their quality and their speed you in business pretty much everything customers enjoy requires some materials a great meal required delicious ingredients a movie experience required comfortable seats even your massage was made better with fragrant nourishing oils companies must recognize that every material purchase is an opportunity to improve the product or service provided procurement and materials management are the segments of the company that fund suppliers purchase the materials and then make sure that this inventory is stored and used effectively if done right procurement and materials management can improve customer satisfaction they can contribute to the company’s profitability and by partnering with reliable suppliers they can help the company develop a stable supply chain that can be counted on to continuously deliver high quality products and services to the consumer to illustrate these points let’s use a cell phone as our example product and actually since we’re buying parts for this cell phone let’s consider just one part of the cell phone the battery what does our company need to think about let’s first consider the consumer what does the consumer expect they want value a long-lasting battery at a reasonable price they probably also want a battery that is safe a small lightweight battery that won’t overheat if this is what the customer values and if those are the things that we advertised the battery in some way needs to fulfill the customer’s expectations a great battery helps make our phone better a better phone will sell more units and thus our revenues go up now that we made the customers happy let’s remember that revenues alone won’t bring us a profit we need to consider our company’s needs the company needs to control costs while we’re buying great batteries for our customers we have to know what the total cost of purchasing these batteries will be I’m not just talking about the per unit cost you must consider the total cost of these batteries the cost of storing bad costs associated with theft and damage the cost of negotiating and placing orders from battery companies and don’t forget that someone needs to pay for the delivery of those batteries so if keeping costs low is important to your company you’ll need to remember inventory costs include the cost to buy hold and order inventory that brings us to the final party involved in our battery purchase the supplier the battery supplier will ultimately dictate battery cost and the quality of the battery but they also impact our cellphone company in other ways if they can fill orders quickly we can keep low inventory levels even if we run out of stock it won’t take long to get a new shipment for that kind of service though we’ll probably have to pay a higher price on the other hand a slower supplier may have lower per unit prices but will need to carry more inventory since we have to place orders early just to be sure they’ll be able to fill them before we run out of batteries this takes care of our battery needs today but how about the next generation of cell phones we’ll need stronger batteries that fit in our new phone design and we still need to control our costs in modern business suppliers our business partners when we saw more phones they sell more batteries on the other hand if they make batteries better we may sell more phones because of this suppliers and innovative manufacturers must work together to understand the customer develop new technologies and also to develop manufacturing and logistics strategies whether your company is buying cell phone batteries Tomatoes theater seats or even massage oils it needs to consider the customer the supplier and our company as you head back to work today ask yourself these simple questions are the customers happy with the materials they buy or use do we consider our supplier a partner our suppliers involved in helping us develop better products and services and do we consider the cost of holding inventory or just the cost of purchasing if your answer to any of those questions is no you are likely missing an opportunity to maximize your company’s potential look around you look at your stuff how was your stuff made which items were made well and which items were not which companies do you always trust to make good stuff your favorite car clothing and electronics companies they can only say your favorites if they can deliver high-quality goods over a long period of time good manufacturing and quality control are vital components of building a global brand that customers are loyal to so let’s take a look at some of the primary issues manufacturing managers think about every day and let’s use a car company as our example so once they have a design for a car they need to know the demand how many cars will be needed each month perhaps it’s a brand new model so we might not sell too many the first year but forecast telesales will grow significantly next year so just how big should our facility be remember a facility that’s too big will be a waste of money but if it’s too small we’re just not having enough cars to sell in manufacturing cost is almost always a key consideration so we have to know how much money will it cost for materials labor transportation facilities and energy to make each vehicle how flexible is our manufacturing process how many choices do we give customers do we let them choose car color do we offer a navigation system can they get upgrades on seats entertainment systems Sun roofs which brings us to quality what exactly this quality mean to you aesthetics durability reliability speed manufacturing must make a car that their market deems to be high quality and even then what’s good today won’t be good enough next year manufacturing facilities must be ready to continuously improve then there’s the question of where the cars will be manufactured and by whom should we make them in the country where they will be sold or should we make them in another country should our company make them or should we hire a contract manufacturer to make the cars for us what our issues manufacturers consider when making these types of decisions cost of course materials energy labor real estate taxes all so is it possible that the country has more access to skilled labor or do they have easy access to material and energy related resources perhaps the contract manufacturer has so much experience making these types of high quality products that you know they can make them better than you could ever make them yourself location can also impact speed perhaps their location makes for easy movement of inbound and outbound materials perhaps your end item is big and expensive manufacturing location may impact your delivery times and perhaps you might be able to avoid import taxes currency might also be a factor imagine that you are selling a product in Europe investing euros and getting paid in Euros minimizes the chance that profits might be wiped out by big swings and exchange rates and in some cases choosing a manufacturing location might take into account the stability of the country political stability crime rates inflation rates labor laws and culture executives don’t have to worry about what might happen tomorrow at their factory that might be five or even ten thousand miles away the companies that make your favorite stuff Apple Lexus Nike Samsung Mercedes they have transformed their corporate images into global brands but without a backbone of high quality manufacturing those companies would not survive making their customers happy means that every single product you buy from them meets or exceeds expectations so as you use your favorite product today think about who made it when it was made where it was made and what they are doing right now to make the next product you buy from them even better in just the last few years the term logistics has gotten very popular global companies like DHL UPS and FedEx are known as logistics companies but what exactly is logistics I mean is it just getting finished goods to a customer’s home or perhaps to a store where these goods can be put on a shelf ready for purchase yeah that’s logistics but it’s just a small part of what the world of logistics and compasses you see logistics doesn’t just happen in the last mile before a product gets to the hands of the user logistic happens before a product is even made even in the most simple supply chains raw materials and components are shipped to manufacturers finish goods are shipped to distribution centers and from their products make their way to a retail store or an online retailers picking and packing warehouse where finally they can be shipped to your home all along the way there are important decisions to be made that will impact whether the shipment was quickly delivered safely on time in the right amount and of course at a reasonable cost plus we want to know that our logistics process is flexible big orders small orders perishable products heavy products dangerous goods orders destined for big cities and others heading towards a farm domestic orders and foreign orders and nowadays customers want to be informed customers want to have the ability to track their shipments marketing and manufacturing are important but a great product that comes with a big shipping cost and then arrives late damaged or to the wrong address ruins the customer experience as a result logistics specialists are constantly making decisions that must make customers happy and keep the company profitable so how can a logistics manager keep the company profitable keep inventories low move inventory as quickly as possible and at the lowest possible cost empty trucks and containers waste fuel so keep trucks and containers full by planning effectively and don’t get caught unprepared stock-outs rush shipments and shipping errors are extremely expensive and can mean the loss of a customer forever so in the end logistics managers are tasked with making all sorts of decisions that balance cost speed and customer satisfaction what types of decisions well should we use a truck train ship or plane what type of packaging is needed to keep the items safe they also consider storage issues like what’s better having high levels of long term inventory sitting in a warehouse or low levels of inventory moving quickly through distribution centers and if you’re shipping globally you’ll need to consider issues like import and export laws tariffs and documentation you see logistics is about a lot more than delivery oh and don’t forget materials don’t just move in the direction of the customer reverse logistics deals with returned items items requiring repair that need to be sent to a repair center and reusable and recyclable packaging as companies look to control cost reduce waste and eliminate product loss while still getting the right good to the right place at the right time companies need to consider all of the pieces of the logistics puzzle Logistics is beneficial for everyone involved customer get what they want how they want and when they want it and companies can make it all happen with minimal cost and waste now that you have a better understanding of some of the vital pieces of the logistics puzzle think about which pieces your company may not be considering you whether your company has customers wants customers or if you’re already successful company wants even more customers knowing that customer is vital to securing sales so as the company looks to start selling their products and services often one of the very key questions they need to confront early in the process is who should my company want as customers who is our target market well your target market should probably include people that you’re capable of satisfying while still earning a profit that way they’re happy and you’re happy so how do companies describe their target markets well target markets can be described in a number of different ways is your target market made up of men or women how old are they where do they live what language do they speak what are their hobbies what do they do for a living how much money do they make or better yet how much money do they spend and is it possible your target market is not made up of people perhaps your target market is made up of other companies and it doesn’t matter where your company is today if you’re a brand new startup company a large global firm with a rich history or maybe your future company is only an idea in your head knowing your market is important to being successful today and in the future why well a company and its marketing team and Salesforce have only so much time and money they need to use their resources wisely we’re not just making sales today we’re building a target market that is loyal to our brand so whether you want to know your customers desires today or tomorrow whether you want to use your company’s money and time wisely or if you just want to find new customers for your products and services understanding your target market is vital to the evolution of your company friends family business partners there are so many people in our lives and so many others we have yet to meet developing and maintaining relationships with all of them can be difficult but these are the people we count on for support stability and growth nowadays companies understand that their customers serve the same purpose customers support the company a loyal customer base provides stability and our present and future customers provide an opportunity for growth so how can companies reach their customers how can they create an emotional connection that will drive a person to buy your product or service well there are three basic issues that need to be considered who’s the target market you’d like to reach what does the company want to say and how will that message be delivered let’s start by considering the target market a good marketing department will isolate people that they would like to target as potential customers sometimes the market is quite narrow so reaching most of them might be rather simple on the other hand some target markets are large and diverse they contain people with very different lifestyles this could pose challenges in reaching all of them in a simple and cost effective manner so we may need to dissect the target market into smaller slices reaching each slice with a different message or using a different medium now that we know the market what do we want to say to them are we trying to make them curious do we want to stir emotions excitement inspiration fear perhaps the goal is to build trust some companies want to invite customers to be part of a group ultimately we hope the customer will be called to action make a purchase join our club visit our website while a good product or service will satisfy a customer customers need to be aware that the product exists they must trust they will get value their purchase and they must be driven to seek out the product or service and then purchase it developing a message that can quickly inform inspire and move someone act that’s not easy it requires creativity and a deep understanding of human behavior with our message in hand it’s now time to deliver the message to our target market how can we make contact with the customer digitally in their cars at an event in a trusted atmosphere perhaps they hear about us through a friend or maybe they learn about us at a store each of those mediums is different so a marketing executive has to be able to send the same message using different mediums is your message something that can be delivered using audio video pictures digital messaging is your message simple enough that it can be powerfully delivered by other people all the while we need to remember that our budget is limited so as we consider identify the target market for our message crafting a message for that market and then delivering that message so it is heard or seen by our customer we have to ask ourselves are we maximizing our investment if we spend a million dollars to communicate with 200,000 potential customers how many of those people will need to purchase our goods and services such that we make a profit relationships are a two-way street both parties need to feel enriched by the relationship by knowing your target market crafting a meaningful message and knowing how to deliver that message via multiple mediums companies can communicate with customers new and old customers are interested they’re actually considering making a purchase they’ve taken the step to seek out a representative or maybe they’re at your website perhaps they even decided to visit your store now it what are some of the key issues that need to be considered in making that first sale and then having them purchase from us again at this point typically customers are looking for trust comfort stability and growth all play a part in moving a customer to make a purchase therefore your people your website and your facilities all need to demonstrate that you are committed to the customer and their needs that the company cares that the company will be here if you need assistance and that the company is looking for opportunities to get better the facility signage furniture cleanliness how the company representatives look and act the words that are used documents customers are required to fill in and sign they all carry messages are your people facilities and websites sending out messages that drive sales or are they driving away potential customers let’s consider delivery even when a customer is ready to purchase from your company they’d like to know when the product or service will be delivered fast delivery free delivery easy in-store pickup installation it’s important to know what your target market wants and needs and it’s important to understand what your competition is offering the final hurdle in making a sale is processing the sale especially on that first sale or with any major purchase before you give your money over to any person or company a number of questions probably race through your head how many floors do I need to fill out why do I need to sign a contract what does the contract say what types of payment are acceptable when will they tell me the final and full price of the transaction before the transaction is complete will representatives push me to sell additional products and services what are the options for cancelling or changing my order what happens if I’m unsatisfied with my purchase what are the return policies what happens if the item stops working you are so close to closing the deal and still there are so many opportunities to scare away the sale whether you’re selling to a new customer or a return customer consider the importance of your sales resources sales reps facilities website work to provide competitive delivery options and create hassle-free business processes that protect both your company and your customer customers they’re here they’re interested now it’s your job to show the customer that you are committed to giving them what they want and demonstrating that the transaction is only the first step in developing a long term relationship you whether you’re starting a new business developing a new product or service offering or even if you’re developing an improvement initiative at your company you are exploring unchartered territories an explorer may need food and supplies but in business you’ll need money for our adventures the question of course is how much money it’s a very difficult question to answer having lived through some failures and successes has its value good and bad remembering the key to success in another project or better yet knowing what killed your project last year can be vital to understanding the true financial needs of a new project and the more daring your project the more unknowns there are so having a vivid imagination can be useful in developing a budget what will be needed if you run into design problems what happens if your product catches on quickly what happens if there’s a product recall truck accidents warehouse fires a movie star uses your product on TV are you ready for everything good and bad even when a company is an overnight success it doesn’t mean the company started yesterday and then became profitable today they purchase materials and equipment they buy or lease offices and factories they hire and train people and then they open the business does your financial budget have enough money to even get you here notice you haven’t even made a sale yet so far it’s only money going out the door now that sales begin you may be saying now we can be profitable not so fast until you pay for everything you have spent up to this point you aren’t making a profit it could take months or even years before you’re actually making a profit let’s say it only takes six months to turn a profit did your financial budget account for six months of wages rent materials energy equipment and maintenance office supplies perhaps you also start to notice that if sales continue to grow you’ll need to get more space hire more people use more energy buy more machines and materials will you have enough money to expand even when revenues are just beginning to blossom so whether you start a new company launched a new product or start an improvement initiative you’ll need to have the money to start the project support the project before revenues are generated and also be prepared to fund growth and expansion if success comes quickly discovery and innovation are exciting for any company but they come at a price be sure your company is prepared to pay knowing how much money is needed to launch a business a product or an initiative is difficult but once you have a number it’s time to find the funding perhaps your company has the extra cash lying around even then though you’ll need to show your plan and projections to the finance department and hope they think that your idea is worth investing in if your idea looks like it’ll get the company the best return on investment great but for many of us getting the money will not be that easy so let’s look at some options for borrowing the money this is called debt financing common types of debt financing include loans and bonds alone is a transaction where a borrower gets money from a lender and agrees to repay the money in a certain amount of time sometimes weeks sometimes months and sometimes over many years the lender could be a bank a friend a family member or even a credit card company why does the lender give the money to the borrower well the lender expects to make money by getting interest on the loan and in the case of a secured loan if the borrower does not pay back the money the lender can take assets from the borrower as payback if your company gets a loan you are taking on certain risks you must be ready to pay back the loan or make periodic payments when the loan comes due not paying back the loan in time could bring penalty fees result in the loss of company assets it could hurt your credit rating and if you’re borrowing from friends and family you risk damaging the relationship in some cases though companies could issue bonds bonds are essentially small-scale loans from investors and just like a bank they will pay you interest how about if we don’t want to borrow the money what can we give investors instead of interest payments we could give them a stake in the company big corporations can issue stock each share of stock might be sold for $100 the company gets the hundred dollars to invest in new ventures the owner of the stock now owns a very small percentage of the company how small well some companies have millions or even billions of shares but suppose a company sells even just 1 million shares the company might be able to raise tens or even hundreds of millions of dollars very quickly small private companies though might look to venture capitalists these folks will give you money but they’ll want ownership in return for example you might sell them 25 percent of the company for a five million dollar cash investment the company now has 5 million dollars in cash but in return the investor will demand you grow the company such that their 25 percent stake in the company will grow as the company grows then again some entrepreneurs raise money by selling parts of the company to friends and family again this is very risky they now feel entitled to manage the company or perhaps ask for their money back if they don’t agree with your management loans bonds and equity investments are sort of classic ways companies raise money but nowadays we also have crowdsourcing money online business competitions where startups present their ideas and judges award funds to one or more companies companies may also seek grants or gifts from the government or charitable organizations often this type of financing is available to companies that are either owned by or serve underprivileged or underrepresented groups look raising money is not easy and often it’s not risk-free so understand your needs and understand the trade-offs so you can explore the financing opportunities that are best for your company success is great but now what in many cases companies work so hard to break even that they never even imagine what to do with the profits and strangely the more profits that there are the more questions there will be about how to use them that’s why the best companies plan for success they already know how they’ll use the profits or at least they have ideas in some cases the answers are easy if profits were promised to investors you may need to distribute some of the funds and if you have lots of investors you may need to figure out who gets paid first it’s also possible that some investors may look to divest once the company is turning a profit so the company might have to be prepared to give the investor back their entire investment plus any appreciation in their share of the company if you didn’t get your money from investors you probably borrowed money for this or other ventures you may want to pay off some of these debts the government they always want their cut too so your company needs to plan to pay taxes on those profits and let’s not forget about the people that made this success possible how do you think your employees feel when the company starts generating profits proud happy excited relieved yeah probably but they also probably feel like they deserve a reward is your company prepare to pay out bonuses to keep employees happy and keep them energized for the next few months and while bonuses are great some want something more permanent perhaps a raise or a promotion maybe education incentives or employees would just like to see the offices improved and don’t forget that your competitors will try and steal away your best employees in an effort to copy your success are you prepared to pay up to keep those employees perhaps you still have money left over what else could you do well you might want to continue to grow this opportunity investing in more people facilities and materials may be required you might need to invest in research and development innovating this product or service or perhaps developing new products and service offerings it’s also possible the company may want to invest in other companies and their new business ventures and some companies even want to share their good fortune with others by giving to charities they believe in or investing in the communities where their employees live and sometimes they provide special offers and awards to their customers but the reality is the best companies do not distribute donate or invest all their profits saving some of that money is an option times may be good now but we never know what lies ahead a bad economy new competitors new business opportunities having accessible cash and accompany savings might be the key to comfort and happiness in the future the world of business is filled with risk and failure any good business person knows that and thus they prepare to deal with adversity but the best business people not only survive the day-to-day struggles of business they are also prepared to deal with success is your company prepared for the challenges that come with success if not your success may be very short-lived you why do companies decide to bring on new people perhaps they need to grow a department maybe they need to replace a person that left it’s possible the company requires a new type of employee to fill a modern need whatever the reason to make a good hiring decision the company needs to be able to describe the position to be filled what type of employee they want to fill that position and also how much it will cost to effectively fill that position let’s say we want to hire someone to redevelop our website and then to manage and grow the website in the future how would you describe the positions so that it sounds interesting so that we can attract the very best candidates motivated professionals but for a person with a bit of experience and for someone motivated to develop a strong career this particular web development job sounds exciting they’re interested they like us that’s good but do we like them let’s tell them what we expect hopefully the unqualified have now moved on and the best candidates are now working on their resume look we can’t interview everyone so we need to do our best to find great candidates and entice them to apply for the job communicating a job description and job requirements and then being sure that the best people know about the job is only the first phase of finding a great person to join our company now that we have applicants we need to figure out which candidate is the best fit for that job and our company so how do companies figure out who to hire well let’s consider what we might want from our web developer they need to talk to executives they need to have the ability to develop creative content they need to have technical skills they have to understand our culture and our ethics and they have to be trustworthy how could you see if the candidates have everything it takes to be successful in this job interviews sure but how could you their ability to develop creative content how about a ski to see some of their past work did they have a portfolio of work how about technical skills perhaps we can have them take a test maybe we can give them some homework that they could bring to the interview are they trustworthy nowadays most companies will also do some sort of background check with law enforcement and perhaps also with past employers and once the interviews are over you’ll also need to consider some other issues what happens if no one is fully qualified will you be willing to take someone that is mostly qualified also are your hiring practices legal and ethical is diversity for your company government mandated or part of a plan for corporate excellence and who gets to make the final hiring decision their new boss a top executive the person that interviewed them or perhaps someone in human resources and even when you find the best candidate and decide to make them an offer there is still the question of whether or not they will accept the offer the best candidates often have lots of options to choose from offers counteroffers negotiations and signing a contract may be all part of the hiring process once they accept the position you will need to gather their personal information for company records and sign them up for a benefits package once we have them in the system the new employee might go through a corporate orientation and then they might get trained on equipment or business processes imagine going through all of that all that time all those resources and then finding out you hired the wrong person great people are the key to a great work environment and excellent customer satisfaction recruiting evaluating hiring and training employees is extremely expensive companies that do not take these processes seriously waste lots of time and money and are then stuck with a subpar workforce the best companies want the best people they will fight for them and once hired the company is looking to get the very best that person has to offer that means finding their strengths identifying their weaknesses providing opportunities to develop their skills and as the person grows putting that person into leadership positions that will both help the company grow and also keep the employee satisfied bigger small companies want to measure the performance of their employees and the bigger the company the more the company will rely on data but which data what should a company measure and why do companies measure companies measure because they need to know areas of strength from those strong people and groups they can learn about success and pass along that knowledge to others in the company companies need to find weaknesses so they can fire people just kidding firing people is expensive there’s no guarantee the next person hired will be any better so finding weaknesses helps the company know what types of help to give those that are struggling in a company we are all part of a corporate family and as such we need to help those in need think of it this way you hired them so they are your responsibility another reason companies measure is to motivate employees think about a time someone said they were going to measure your individual output did you up your game didn’t you start noticing details perhaps you even started getting creative about how to solve problems focused and creative employees companies love that but remember good measurements will motivate good behavior bad measurements might motivate bad behavior and while the performance metrics may motivate employees temporarily they won’t stay motivated unless they are rewarded for that excellent output so the best employees will expect money promotions Awards job security and corporate benefits for content you’d excellence all of this is not easy though companies face all sorts of challenges in measuring and motivating like what well coming up with good performance metrics is difficult some things like attitude customer service and work ethic are difficult to measure also sometimes it’s difficult to evaluate individuals when they work in teams even a single bad performer on a team could bring the whole team down and even if a company can identify the best workers it’s hard to reward them all rewards must be doled out in a fair and legal manner also while one employee may want more money another may prefer a long term contract or perhaps a promotion and let’s not forget that we also need to keep underperforming employees motivated providing these employees feedback giving them advice and bidding them assistance requires excellent people skills if you’re too harsh they may become timid they may avoid making decisions and taking risks on the other hand if a manager is too nice the employee may believe that there is no need to change their behavior so let’s take a little self quiz are you a good employee what are your strengths and you prove it to me with numbers based on your strengths how can you help a company grow how about weaknesses what types of training and support would you like from your company finally if you prove yourself successful in your job what would you expect in return for many of us coming up with answers to all of those questions can be tough now imagine being responsible for coming up with answers to every question for every employee in your company if you can do that and do it well then you’re doing with the very best companies in the world do do you love where you work whether the answer to the question is yes or no the more interesting question is always why why do you hate or love your company let’s look at some of the common issues that motivate us to love or hate our company in some cases we just don’t like what we do tedious work simple work repetitive work interacting with angry people delivering bad news to good people those types of jobs numb our brains and they hurt our soul nonetheless these jobs exists and in many cases these jobs are required and often the people in those jobs know this still in return they want to be told that their work is appreciated they want to know the company is working hard to make their jobs easier whenever possible the place where you work can also impact your psyche people love clean modern and safe workplaces they want a good balance of interaction with co-workers and also areas of privacy lighting furniture technology the neighborhood the restaurants transportation options the lunchroom all of these things can make coming to work each day harder or easier and while a company can’t give you everything employees appreciate when the company improves the work environment there are many ways to pay employees hourly wages annual salary sales commission year-end bonuses stock options signing bonus upon hiring each of these has its own pluses and minuses for the employee and the company some companies and employees want minimal risk others prefer to motivate workers based on their recent performance so it’s important to remember that some employees might prefer an annual salary others may want the risk and rewards that come with getting paid on Commission and perhaps others would like some combination of the two perhaps employees desire some personal benefits medical insurance retirement packages is the company willing to take care of your family will they take care of your significant other will they assist with education expenses can you work from home how much vacation will they provide you perhaps they have free food and beverage in the office can you bring your pet to work free shuttle to work or how about valet parking perhaps they have a fitness center in the facility there are so many possible benefits a company can offer again though while some employees may love all of these benefits others may trade fewer benefits form or pay for some employees job security is of vital importance especially for employees with families a long-term contract and a steady wage may be better than wondering if there still be able to pay for food and shelter next month and while long-term contracts may not be possible for everyone when employee knows that they work at a company that values stability cares about employees and their families and understands when workers need time off to care for themselves and a family member that type of commitment and loyalty to employees is something that can create a special bond between the company and their employees finally the very best companies want employees that are always getting better why because some employees get new jobs some get promoted to better jobs in the same company eventually some folks will retire and on occasion someone needs to be fired because of this companies must develop all of their employees such that when someone leaves someone else is ready to take over and by educating and mentoring employees exposing them to new projects and giving them promotions the company earns the trust of their best employees so let me ask you again do you love where you work hopefully now you not only know the answer but you also know why developing a satisfied workforce is tough to do if you love your company hopefully now you appreciate how truly special your company is much like romantic relationships ending employee relationships can be difficult and while some human relationships last for a lifetime the same is not true in business eventually employees leave the company sometimes they leave you other times you must end the relationship and like with romantic relationships the end may be smooth and easy but other times the end comes with friction how can companies minimize the friction well it all starts on day one the day you hire an employee what is said and what is signed that is an opportunity for a company to make a smooth ending possible companies need to be sure not to set false expectations and they must be clear about what would constitute termination if the company is too harsh on day one a bad relationship may have already started if the company is not specific enough it could shield bad employees from termination there are a number of reasons companies terminate employees illegal behavior inappropriate behavior poor performance lying about skills or past jobs there are all common reasons for firing an employee and unfortunately even good employees may be laid off when a company is struggling financially no matter what the reason a company must be truthful they must tell workers why they let them go and all managerial statements related to terminations and layoffs must be documented also companies must be fair all employees must be treated the same way inconsistencies and employee evaluations may be construed as discrimination when appropriate consider providing departing employees a severance package why it can build goodwill it can soften the blow when layoffs of good workers are required and in a contentious parting of the ways it can bring about a swift resolution in all these cases though it is important to document the purpose of the severance while terminating an employee for any reason can be difficult sometimes employees leave the company by choice they may get a new job at another company they may decide to leave to get a degree and of course some folks decide to retire in all of those cases it’s vital to try and set up a final meeting an exit interview this allows the company to thank the employee for their service find ways to stay connected and ask them for their positive and negative experiences with the company in an effort to improve the employee experience in the future in the case of retirees staging a retirement event can be helpful to everyone saying their goodbyes and allow management to recognize the employees complete contributions to the organization the person retiring is celebrated and other workers may be motivated to build a deeper relationship with the company that takes time to honor employees that have given a good part of their lives to this company the best companies are the rules of terminating employment they respect labor laws when bad employees are involved and they know the importance of honoring their retirees and they may even have specialists that are responsible for ending employment relationships in the company saying goodbye is never easy but in the world of business it’s something you’ll need to face you perhaps you like Starbucks coffee maybe you love to buy things from amazon.com do you have a Netflix account where do you buy your groceries which cell phone provider do you use the companies that sell you the things you need they appreciate the purchases you’ve made from them but they want to keep you as a customer so they’re probably more interested not in what happened yesterday but what you need today and what you’ll need in the future now more than ever companies are relying on customer data to discover the mistakes they’ve made in the past and to help inform the business decisions they face today the first hurdle in using data to make better decisions is gathering data some companies have an advantage in that they require that you create an account and then via digital devices they can track all of your behavior when you use your account because of the digital account they have your personal data and they also have your transaction data for companies like Amazon Netflix and your cell phone provider gathering data can be rather easy grocery stores and Starbucks rely on frequent buyer programs but they can also track all your transactions tied to your credit or debit card suppose a company wants new customers they could use demographic data associated with current customers or they can gather public and sometimes private data from companies like Google Data consultants and sometimes from the government data is special because it can be so personal if you went and asked a data mining company what they knew about you you’d probably be shocked angry frightened and perhaps a little embarrassed this is why companies that collect and purchase data about individuals must be extremely vigilant about keeping that data safe the data your company collected could be used to defraud embarrass or harass your customers it may reveal information about your suppliers that their competitors could use against them and it could inform your competition about how they could steal away your customers poor data security is a threat your customers business partners and your very own company now provided you can keep the data secure the data collected may show changes in buying patterns of your grocery store customers perhaps the aging of your customer base is impacting the sales of calcium supplements data can show where most of Verizon’s cellphone customers are located it can illustrate shopping patterns at Amazon that result in sales made and transactions that the customer never completed it might even reveal how cloudy days impact the amount of coffee customers drink the question is is any of this important and if so what should a company do about it the best companies they don’t blindly look through data they pose interesting and important questions that relate to a specific decision then they look through the available data for answers for example should Amazon consider a lunch delivery service in metropolitan cities or should Netflix invest in programming targeted at Spanish speakers these are directed questions that direct data analysts as to what to look for in the data understanding your customer who they are what they like when they want it how they’re changing it’s the most important thing in developing a company so next time Amazon Netflix Starbucks or any one of your favorite companies announces a major change ask yourself how the data they collected drove them to make this change and next time your company faces a difficult decision consider the challenges your company faces in gathering the data needed to find a solution to your problem if your company doesn’t already have a data specialist make it a priority your company’s future is counting on it what would you say if I told you that coca-cola is coming out with an electric car or that Starbucks was going to have live punk rock bands at their largest locations did you know that Apple is going to open a chain of Mexican restaurants I’m kidding of course none of those companies would likely invest in any of those ventures not because they couldn’t necessarily make them successful but rather because of your reaction to those announcements coca-cola manufacturing an electric car consumers would wonder really what do they know about cars what I want to tell people my car is made by coca-cola how about Starbucks having live punk rock in their stores that doesn’t make any sense that’s not what their customers want even if some customers like punk rock that’s probably not the reason they go to Starbucks in all of these cases these major companies are limited by their brand coca-cola is a world-class beverage company Starbucks is a global coffee chain electric cars and punk rock just don’t seem to make any sense at the same time though their brands define them their brand will also inform customers about the expected quality level it will help them launch related products and services if coca-cola announces a new fruit flavored beverage line or even if they come out with a Coke flavored line of desserts some of their present customer base may be interested each product has a relationship to something coke already does similar product lines similar flavors and these would be products that would likely be sold in the same place other coke products or salt and how about Starbucks besides coffee what defines them their colors and the logo the decor and ambiance of their coffee houses the care taken in taking your order and making your drink that is part of their brand if Starbucks announced new drinks a new line of home decorations a relationship with a charity or live in store music a Starbucks customer might be intrigued and perhaps in most cases they would trust that Starbucks would understand what their customers expect so we can see how Starbucks very powerful brand creates opportunities for growth and expansion and to a certain degree why the brand may also be limiting as your company grows consider your logo and colors your employees and facilities your website and advertisements and of course your product and service offerings and where you choose to sell them every decision in those areas begins to define your brand a comforting and consistent message to your target market might result in customer loyalty and opportunities for growth mixed messages in advertising product quality and the stores where your products are sold they confuse or alienate your customers so today I want you to consider your favorite brands or maybe Google most popular brands or most valuable brands consider a few of your favorite or maybe least favorite brands on the list what does that brand mean to you in terms of product quality corporate values customer service the types of customers they attract the places where their products and services are typically sold consider products and services you could see them develop in the future now ask yourself is your company’s brand just as easily defined is your company’s message consistent does your company’s brand limit growth or do your customers trust your brand to develop new products and services in the future your brand it’s your identity it carries messages to customers make sure you take special care to develop a brand that defines what you are and what you desire to be today we know Apple as a versatile innovator of handheld devices iPods iPhones and iPads electronics that changed the way we live machines that are both effective and efficient to use but also elegant in their design before the iPod though Apple was a personal computer company they didn’t invent the personal computer but compared to conventional PCs Apple’s computers were stylish and many consumers felt they were so much easier to use their brand was defined by words like elegant design user-friendly computing excellence and then one day this personal computer company decided to start selling portable music players we all know how well the story ends for Apple but when Apple made this shift to handheld portable devices it was seen as a big risk but Apple had a strong brand yes a brand built on personal computers but also a brand defined by style and user friendliness Plus Apple had developed such a loyal following that their customer base was eager to see if Apple could make music easier to enjoy anywhere as your company manages its present state and considers its future it’s helpful to study a brand like Apple Apple understands that its present offerings computers portable devices iTunes and their Apple stores are what connects them to consumers today excellence in product quality service accessibility and overall value their vital to maintaining a strong brand in turn all of the effort expended to keep customers happy today keeps Apple in contact with their customers this helps Apple understand its own weaknesses and also informs Apple on changes in their customer base the brand stays strong today and the information can be used to develop new products and services for tomorrow what’s next for Apple who knows but their ability to make machines and sell media in fun and convenien waise is opening up the possibility for Apple to sell nearly anything we find vital to our lives if you love Apple would you consider an Apple TV an Apple car how about Apple appliances for your kitchen Apple used a reputation of elegant design user friendliness and an intense brand loyalty to reach out into new product categories and services what can your company use to expand its portfolio of products and services think about the words that customers use to define your company how could you improve your image by making changes to your design your materials your employees your website based on your image what would your loyal customers trust your company to make for them any good long term relationship requires us to be aware of the needs of our partner and also requires that we effectively communicate with our partner focusing only on our company and not the customer or listening to the customer without committing to change each could result in a broken relationship as we manage customer data and as we develop our company’s brand remember we’re working to strengthen and grow a relationship you money it’s the lifeblood of the organization it needs to flow money comes in from customers money must also go out to employees and suppliers what happens if the flow stops no revenues from customers the company dies if we stop paying people no supplies no employees the company dies so whose responsibility is it to keep track of the money flow finance no finance does deal with money but their job is not to keep track of money flows their job is to obtain funds and also to invest them keeping track of the money flow is the job of accounting they’re responsible for tracking money coming in from customers money going out to employees and suppliers and they’re also responsible for keeping track of money flowing inside the organization from one department to another why is this important and who benefits from this tracking of the money for that let’s discuss the two types of accounting managerial accounting and financial accounting managerial accounting keeps track of where all the money goes this is important to people inside company this helps with budgeting it helps us keep track of departments that are using money wisely and it also tells us where there might be waste managerial accountants are the ones that tell us how much it costs to make and deliver a two thousand dollar television to the consumer so managerial accountants help managers inside the organization measure cost of production marketing and everything else that goes on inside the company they also assist in developing budgets for next year as well as budgets for new projects after the fact they can then report if people are staying within those budgets plus managerial accountants find ways to help us minimize taxes so what do the folks in financial accounting do instead of being responsible for reporting to folks inside the company the accountants are tasked with developing reports for people outside of the organization why is this important it informs people about our company’s financial status that’s important for anyone considering investing in the company and for organizations that might consider lending money to us plus government agencies special interest groups employee unions law enforcement and sometimes even customers are interested in knowing about the financial activities as well as the financial stability of the organization while financial reports are generated by financial accountants throughout the year they work hard to develop the all-important annual report the annual report provides financial data a written recap of events from the past year and a statement of concerns and opportunities for the company in the future this information in the annual report will influence all sorts of actions and behaviors inside and outside the company so financial accountants must carefully consider every word and every number in developing an annual report that abides by the laws of commerce and does not mislead parties inside or outside of the organization as you can see having accountants both managerial and financial accountants helps a company learn from its past understand its present financial health and also plan for its future growth you may not love accounting but hopefully now you understand just how important they are for any organization that requires money to survive what is your financial worth how would you figure that out well to start we’d add up all of your money and the stuff you own cash savings retirement accounts your home your car and other property we total it up those would be your assets now for most of you you’d also owe money bills power water cell phone we’d also add in credit cards car loans student loans your mortgage those are your liabilities now take your assets and subtract your liabilities that is your net worth for some of you the number may be positive you have more than you owe for many others though liabilities exceed assets you have a negative net worth accounts do the same thing with companies except for companies assets minus liabilities gives us owner’s equity so what would be the assets for a company cash and investments machines and furniture buildings and land and also vehicles for the most part those are tangible assets but you’d also include intangible assets like patents trademarks and copyrights how about corporate liabilities companies have bills they pay off loans like you and I but they might also have to make payments on bonds they issued to investors corporate assets minus corporate liabilities that gives us owner’s equity and again just like with our net worth sometimes companies have positive owner’s equity other times it may be negative so why not take stock of your personal net worth today add up your personal assets consider your personal liabilities and then calculate your net worth so often we’re caught up in just making money and paying bills we get lost in the day-to-day finances perhaps by calculating your net worth you’ll see your finances in the big picture and perhaps it may change your behaviors when companies examine their assets liabilities and owner’s equity they’re doing the same thing they’re looking at the big picture because while a company may have lots of sales and small bills to pay today they may not be considering debts that may not come due for the next couple of years so don’t judge a company by what you see because just like your neighbor with the great house and luxury car it’s possible the luxurious hotel you love may have lots of beautiful assets but they may be loaded with millions in liabilities in order to measure and report that our annual profit companies will develop an income statement an income statement adds up all sales and then subtracts all sorts of costs and taxes one important thing to remember is that an income statement is an annual statement so if you do a Google search for Starbucks income statement it will likely generate income statements for the last three to five years it’s also important to remember the company set their own beginning and end of their financial or fiscal year so why don’t you open up a browser window right now and find income statements for your favorite companies see how they make their money and see where their money goes perhaps you’ll begin to better understand the challenges companies face in actually making an annual profit accountants are important to companies and investors they tell us what’s happening with money inside the company they measure assets liability sales expenses inventory and ultimately they tell us about the profitability of the company I want you to start to see these concepts in action go to Google right now and search inventory turnover Wall Street Journal or earnings per share Wall Street Journal what will you find well not only will you find articles about how different companies are performing you’ll probably find articles arguing about what these different ratios may mean in different industries and with just that little bit of knowledge you’ll be able to form your own opinions about different financial ratios you how does the company get stuff done whether you’re paying at the register getting a refund placing an order from a supplier or perhaps you’re applying for a loan from a bank good companies have documented processes that allow them to perform repetitive processes effectively and efficiently business processes are vital to any growing company they allow for consistent high-quality output by documenting business processes companies can expand quickly they can essentially become cut and paste companies opening up new facilities by just repeating what is done at other facilities so what defines a good business process a good business process must have good intentions good corporate goals and good outputs for customers a good business process must deliver reproducible results no matter which locations customers go to they should have a consistently excellent customer experience finally a good business process must be measurable and manageable in other words a manager must be able to see through data if the process is doing well or if it’s struggling and if the numbers are poor a good manager should be able to guide employees to improve their results so let’s take a business process we are likely familiar with placing an order for goods that will be delivered to our home a process should have good intentions what should be the company’s intentions first take the order information accurately items names address payment information also the process should be fast and easy for the customer and perhaps it should be a low cost process for our company to perform the process we create should be reproducible so if we plan on taking orders over the phone we need to create a process that is easy for our operator to carry out or perhaps we are Amazon in which case we have the customer do most of the work for us in an online form but remember we need the process to be accurate complete and it needs to not scare away the customer in either case though we are likely using an online form that will be filled out by our operator or a customer this helps us with the third consideration in developing a good process this process needs to be measurable and manageable by having an online form capture the data we can measure the speed and accuracy of the process we can track the types of mistakes made and with this and lots of other data our managers can use simple and advanced metrics to figure out how to make this process even better what types of business processes do you have at your company in other words what are the things that are done over and over again now consider each process on its own does it have good intentions in other words does it consider all of the stakeholders if this is a good experience is this experience reproducible is it good every time for everyone finally what type of data is being captured can managers easily access the data to manage and improve the process for customers and employees in the future are there opportunities to save time and money can we improve quality business processes may seem small and rather insignificant but the world’s global organisations understand that business processes are the building blocks of any great organization as your company looks to grow and expand don’t overlook the value of a great business process what types of resources does a company have materials machines money and employees as companies seek to accomplish daily tasks and plan for the future knowing the resources available to them at any given time is quite valuable what do companies use to track their resources one of the primary tools companies use to capture and store data is called ERP that stands for enterprise resource management systems ERP systems are tied to nearly every process in the organization material purchases are tracked so we know what was bought from which company and how much was paid new hires are tracked salary position in the organization and personal information is all captured machines are tracked which machines do we own are these machines scheduled for use the maintenance record for each machine should also be tracked even customer transactions can be tracked what was bought by whom when what did we pay as you can see valuable information related to time money people machines is all being captured and stored by the ERP system and this information can be available to anyone in the organization sales operations HR anyone this can help a company make informed decisions about future purchases about the types of employees we have and the types of employees we need to hire it even tells us about how customers patterns are changing in a data-driven world having an IT system that is tied to our processes and our resources is vital and while you may be at a small company now it’s never too early to start utilizing an ERP system is your company utilizing an ERP system if not the folks in marketing sales HR finance accounting basically everyone they probably don’t have the data they need to maximize the performance of the company data analytics is vital to maximizing performance in the modern world be sure your company is collecting and storing the data needed to make meaningful data analysis possible data is everywhere companies are inundated with data data they collect and data available via the internet the government and even via data consultants the question is what can we do with data what should companies be looking for I guess a data specialist would likely tell you that with the right data a company can do nearly anything that doesn’t exactly give us a starting point though so let’s look at some of the things we can track learn and illustrate with data what do customers want they want companies that provide a good mix of cost quality speed and flexibility using data analytics we can see the prices customers pay the number of returned items internet ratings for our products and services the time it takes to ship orders customers may want great prices excellent quality speedy delivery and lots of options but how can we be sure that is what they’re getting data of course if our numbers are poor we know where we need to make changes and if we’re producing great numbers we now have proof we can pass along to customers via salespeople and advertisements what companies want companies want to have effective products services and processes they want to deliver excellent results in the most efficient way possible and they want to be able to adapt to changes in the market what does this mean it means that as your company develops performance metrics be sure you have performance metrics in each of these three areas effectiveness efficiency and adaptability for example effectiveness how many cars did the company sell efficiency how much was the sales and advertising budget to produce that many car sales adaptability under what conditions were those car sales made were interest rates low or sales good everywhere or just in certain parts of the country if your company isn’t tracking data all three areas it’s possible the company may not be aware of weaknesses and opportunities that could impact the company in the future once a company captures the data they need now they have access to metrics that will guide them to the company’s strengths and weaknesses and this allows the company to identify opportunities to learn from the best and to provide assistance to those that need help in training most companies have discovered the importance of data analytics as a result we are now seeing companies that want to use this data to inform and influence others in order to do this companies are concentrating on data visualization often companies are utilizing what is often referred to as executive dashboards executive dashboards are like the dashboard in a car they are designed to provide people with some of the most important data these reports can be important to sales people trying to make a sale or they can also be used by managers trying to find problems in real time companies are also finding that a well-designed user-friendly dashboard can be used to motivate changes in behavior when employees can see their poor performance numbers they might up their game when a managers see low performance at the Minnesota office they can call the local manager and offer advice investors can increase or decrease their investment based on what is reported in your investor dashboard and some energy companies even develop dashboards for customers so they could see their electricity usage patterns data is everywhere so data analytics is here to stay make sure your company is maximizing the value of the available data be sure your company knows what to measure how do you use those metrics how to effectively share that information and then how to improve the behaviors of your employees your managers and even your customers you
They billed our insurance company over $3 million for the cost of transplant. Then I have another EOB right after it was it was another $1 million.So you’re looking at a $4 million transplant. I don’t know what people do without insurance. How could you even begin to pay that? We hear so much about how expensive medical bills are, we’ve almost become numb to it. In 2017, 1/3 of the money raised on GoFundMe went towards medical campaigns. And the site raises $650,000 a year for more than 250,000 medical campaigns. Luca was born with Alveolar Capillary Dysplasia and Hirschsprung’s Disease. At three weeks old, he had surgery to remove part of his colon. At two months, he went into cardiac arrest. And at five months, he had a lung transplant. His parents had to turn to fundraising almost immediately just to keep up with the medical bills. They did a clamshell approach and he has several scars from all of the other surgeries. So when did the U.S. health care system go from a philanthropic program to a multi-billion dollar industry? And where do the funds go once the bills are paid? Today, the U.S.
Health care system is in a sort of tug of war between physicians, hospitals, pharmaceutical companies, shareholders and insurance companies. The list goes on. But for this video we’ll just focus on these entities. Caught in the center of it all are the patients. We’re often not able to provide the type of care that we want because of the cost of care. Most Those costs are now forcing a growing number of uninsured or underinsured Americans into traveling abroad for medical treatment. Everyone started thinking of health care as a business where the metrics were profit, return on investment, efficiency, and those aren’t the metrics of health but that’s how we judge hospitals today. You would think that they would be looking out for your chronically ill children and you know all of the medications and and things like parking at the hospital. No. No that’s not covered. But before we get to all of this, let’s rewind to understand how we got here.
This chart is a pretty good place to start. The data shows health care spending versus life expectancy. The rest of the world pretty much stays the same course. But around 1980, the U.S. veers off. I like to say it’s kind of the, the road to hell is paved in good intentions because everything we’ve done was in the name of better health. To be clear, growth in U.S. health care spending has slowed over the past few years but it’s still way higher than in other wealthy countries. Before government programs like Medicare and Medicaid, Blue Cross and Blue Shield were the main providers of health insurance in the U.S. At the time they were nonprofits and accepted everyone who wanted to sign up. But at this point, it wasn’t to control costs. It was really insurance in a worst case scenario. And after World War II, employers started offering health insurance. Suddenly demand was booming. From 1940 to 1955, Americans with health insurance went from 10% to more than 60%. That demand created a business opportunity, and for profit companies started rolling in. Insurance was the first sector because it’s in some ways the original sin, in the sense of it separated the consumer from payment right.
So it felt like nobody was paying. By 1951, Aetna in Cigna were major players in the for profit health insurance market. And in 1965, President Johnson established Medicare and Medicaid. This medical insurance for those over 65 will become effective July 1st. Even so, the for profit insurance market continued to gain steam through the 70s and the 80s, capturing more and more of the health insurance market. Meanwhile the first for profit hospitals started popping up around the country.
When Medicare and Medicaid started, there were none. But by 1983, one in seven U.S. hospitals belonged to an investor-owned multi-hospital system. By the 90s, Blue Cross and Blue Shield had merged but they were losing money, fast. And in 1994, they let their local companies turn to Wall Street to stay afloat. Hospitals I think were the first to realize, well we can charge whatever we want for these things because it feels like no one’s paying. But then you know there are all these doctors in the hospitals. They see all these business consultants coming in. They see the hospital’s CEO making two million dollars a year and they’re feeling like wow we’re suckers. You know we’re working our tails off here, and we want in too. Essentially hospitals went from being run as a philanthropy to being run as a corporation.
But these corporations aren’t selling just another widget. They’re putting a price on human health. The health care industry is now the country’s biggest employer. And those employees need to get paid. Throughout all of this is private capital, and lots of it. You would think that if hospitals are becoming more efficient the cost to consumers should go down too. But that hasn’t necessarily been the case. And a lot of that has to do with the billing system. Of course doctors need to get paid. There are admin costs and medical supplies and technology. But instead of this three page bill you’d get in Belgium, medical bills in the U.S. look more like this. I am my son’s secretary and I spent a lot of time taking care of just just medical bills ,and phone calls, and that type of thing. We talk a lot about the billers and the coders and the consultants who really are removed from health care. They’re not there because they care about health, they’re there because they see a business opportunity. And you know you can’t blame them in the sense that that’s what their companies are supposed to do.
They’re looking for business, so a collection agency that does health care, you know to them a bill is a bill is a bill. They don’t care if it’s for somebody’s heart transplant or someone who was not very judicious and spent a lot more money on a Rolex watch that they couldn’t afford. It’s a bill. But how come those bills are so long? It has to do with something doctors call unbundling.
Think of it like buying a plane ticket. You pay for the ticket itself, but there are a lot of extra charges squeezed into your final bill. $30 for a checked bag. $50 for a few extra inches of leg room and another $3 for water. You get the gist. People get irate about it in an airline ticket but in healthcare we’ve kind of come to accept it as, oh that’s just normal. And part of the reason I wrote the book is to say that’s not normal in other countries. Hospitals do this through a complex system of codes. New patient visit: 99201-05. Emergency room visit: 99281-85. Burn due to water skis on fire: V9107. Yeah there really is a code in case your water skis burst into flames, you know, as they do. Different codes mean different prices. Just take the codes for a laceration. You’ll be charged a different amount depending on the size of the cut, where it’s at on your body and how complex the suture is.
Coding historically was about tracking diseases., right. But in the U.S., pretty much alone, how you code a patient interaction is a billing construct. Again something that would had scientific and medical purpose gets translated into a business asset. Every day we spend hours going through check boxes, typing notes, documenting things that we’re supposed to document for billing purposes, that we really don’t think improves patient care. The more that you spend time with computers, the more that we spend time billing, that means a lot less time for face to face interaction with our patients. And that’s why most of us got into medicine in the first place. There are benefits to taking down all that data. In theory, it can lead to better results in the long run. Doctors may find things later that they didn’t catch in the moment. But at the end of the day, it’s just not working in the U.S. Some doctors say they’re concerned about malpractice lawsuits, so they order more tests to protect themselves. Bills keep getting longer, and health outcomes aren’t always getting better. The American Hospital Association declined to comment on criticisms of the current hospital system.
But they do have a fact sheet explaining that hospitals often don’t get paid the full amount that the bill. The AHA claims two-thirds of community hospitals lose money when the government pays Medicare and Medicaid bills. And that “the hospital payment system itself is broken.” And of course a big part of that health care spending is on drugs and supplies, both of which can be hard to get insurance to fully cover. Oh, thank you Luca. Can you show us what’s in that box? Are these your ostomy bags? So we get 10 per box and that lasts me about two and a half days.
What they’re currently charging me is one $1,178 this month for those boxes. Thank you! Let’s talk about one of the biggest issues weighing on the pharma industry right now and that is drug prices. From $18 a tablet jumping to $750 a tablet a 4000 percentage just 24 hours. Do you feel badly about what’s happening? No in fact we’re increasing access to patients, Meg. We’ve all heard about Martin Shkreli raising the price of Daraprim. But what about Colchicine or Epinephrine? The prices of those drugs have both skyrocketed because one company has control over it. The response is usually the same, the companies need to raise prices to fund the research and development for the next drug. For the most part high priced drugs have patent protection from the government. They pretty much have a monopoly in a market so very often you have someone who needs a specific cancer drug. One company makes it, they’re the only company that makes it, no one else can make it.
And since it might be absolutely necessary for your life, they’re in a position where they could charge anything they want. How is that possible? Well there’s not really anyone stopping it. Once people realized you can get away with this stuff it became a race to the top. It’s also important to remember that many of these costs are adding up during a very stressful time. Sometimes the people paying the bills aren’t even conscious.
The analogy I often make is firefighters when they come to a burning house. So when your house is on fire, your family’s inside, you don’t want to be sitting there negotiating with firefighters. Oh you know I’m going to pay you $300,000 they want $400,000. That’s not how you want to do this. And often health care does have that character. Medical emergencies are chaotic. And health insurance is confusing. There are HMOs, PPOs, deductibles, copays and premiums to try and make sense of. You’d think that if people are insured, they shouldn’t have to pay that much out of pocket. But that’s not always the case. Not every doctor accepts every insurance plan. And some hospitals have staff employed by multiple third party companies. So one trip to the E.R. could get you five different bills and your insurance might only cover one. I actually stopped taking ambulances. Really. We had one really really close call where Luca was pretty unstable. We knew things were going south and we drove him to the hospital instead.
I sat in the back and slowly increased the oxygen the entire ride and my husband was driving 120 mpg down 95 because it was faster and cheaper for us to do it that way. When you’re being slammed with those type of bills like you just can’t incur any extra costs. And I’m a nurse so I figured I was in the backseat and if I had to do chest compressions I was going to do chest compressions. Today nearly 30 million Americans are uninsured. That’s down from roughly 55 million in 2010 before the Affordable Care Act. But it’s still a higher percentage than countries like France, Japan and Israel. The insurance companies are supposed to be negotiating their prices lower because in a lot of cases they’re ultimately the ones footing the bill. But as we’ve seen over the last few decades, those costs can still get passed onto consumers. Health costs and contribute to all sorts of inequalities in society. So people who are poor or middle class even, they’re just one serious illness away from bankruptcy. So where do we go from here? Once there’s all this money sloshing around in the system there’s this kind of pile on effect where everyone wants to grab their bit of this huge pot of money.
And now what we have as we’re trying to take it back and reduce costs is everyone is desperately clinging to their piece of the pie. Of course, health care costs have the potential to impact your personal budget if you’re paying for insurance or when you get sick. But it also impacts the country’s bottom line. The government currently spends more than $1 trillion on health care. And the CBO expects spending on Medicare and Medicaid to double in the next 10 years. That’s not just because the population is getting older. A large part of that spending will come from health care getting more expensive. There’s no magic solution as to what to do next.
But people are at least starting to think about the steps it will take to turn things around. One is having a lot more transparency. Both doctors and patients and their families should have an understanding of roughly what it’s going to cost. Alternative route, having some sort of government manufacturing facility so that you could say to Shkreli’s: “OK you want to do that, guess what? Next week, we’re going to be on the market and we’re going be selling this stuff for a dollar two dollars a pill.” Peekaboo. (laugh) Ready. Peekaboo. There is a very very strong possibility that Luca will need a second lung transplant before he’s ten years old. He’s already had one and they will list him for a second. And right now the policies in our health care system is they do not list him for a third.
So I do not know if I will see my child ever hit his teens or early 20s. It’s pretty scary. Like I don’t know if I’ll ever see him get married. It’s just so unknown. .