If it’s your job to eat a frog, it’s best to do it first thing in the morning. And if it’s your job to eat two frogs, it’s best to eat the biggest one first.
– Mark Twain
What does it mean to get involved with your company?
A small business owner gets up each morning and eats frogs. Those frogs may be customer complaints, collection problems, disgruntled employees, or other daily problems. If you have experience owning a small business, you know what loneliness feels like when decisions are required. Most employees shuck hard issues, as they should, and others do not understand enough about the business to offer valid opinions.
Owners of small businesses (good ones, that is), make sure all expenses, payroll and vendors are paid before they take any money from the company. Rarely in the life of a business is there sufficient money for the owner to get the amount of money they might ideally want every period. It takes time for the business to get established and be able to weather business problems (recessions, floods, competition, etc.). In those periods, the owner may even have to put money into the business to cover its needs. The first time the owner goes without a paycheck or has to put money into the business is when eating frogs becomes clear.
Then why do people start and buy businesses? Because if done right, the rewards are often greater than being an employee—not just monetary rewards, but the ability to make decisions, have an on-demand work schedule, or just choose co-workers.
Work everywhere
As the owner of a small business, what do you need to do each day? What’s important to a company?
Work in every department or area of your business with key personnel of your company. It is easy to fall into a groove where enjoyable tasks like design or sales dominate the day. Few small business owners will work to collect money from overdue invoices; that is one of the uglier, more difficult jobs. Fewer will work in the warehouse to help pick, pack, and ship orders; not all enjoy physical labor. Obviously, it is important not to devote too much time to tasks that employees can handle, but a small business owner must be willing to do these tasks under certain circumstances.
Donald Thompson, former CEO at McDonald’s, said on a 60 Minutes interview that he worked at McDonald’s restaurants in all capacities, including flipping burgers and cleaning bathrooms. Working every job at a company is not a necessity for running a business, but Mr. Thompson understood the inner workings in his restaurant and was able to apply that experience to the whole chain. Anyone who owns a company should not underestimate this kind of experience.
Importance of working everywhere
Companies operate more effectively when the owner knows how to do each employee’s job. Employees respect owners who will work alongside them and often work harder knowing that the boss understands how to do their job. An owner will make better hiring decisions when they understand the job’s tasks. Having good employees who work hard is necessary and essential for any successful business.
As a consultant, I always jumped at the chance to work in every part of a company and learn as much as I could about all aspects of business. Working in hot, non-air-conditioned factories in Mexico with a temperature of 105 degrees outside taught me how important well-placed fans could be. Unloading and packing boxes in warehouses was another task for which I earned respect from employees who, while working, often told me things about the company the owner would never have learned. If the owner learned what I knew, he or she might not have needed me.
Case Study 5 – Torreon, Mexico
One of my challenging engagements was a home-furnishing manufacturer in Torreon, Mexico. Their lender sent me to find out why the company was not making scheduled loan payments. My Spanish wasn’t great, but I thought it would be an interesting job, so I took my overused passport and went to Mexico.
Torreon is in the northern part of Mexico and a short flight from Houston Texas. It is not Mexico City but a very quaint town with less traffic and a comfortable amount of energy. For my safety, it was highly recommended to use only certain taxis located at hotels or those called by trusted sources. Each meal was a culinary adventure, as menus outside of the hotel were only in Spanish; menus with pictures were much appreciated. Having the specialty of each restaurant seemed like a good bet, and this region specialized in cabrito (baby goat). As vegetables are mostly the same from country to country, that part was easier and cooked fresh.
What went wrong
Management did not pay attention to the needs in its factory, including production efficiency, quality control, and effectiveness of machinery.
Upon arriving at the manager’s office, one floor above the factory, I was greeted warmly as a representative of the lender. After some routine questions about the factory, I asked the manager about his work effort on the factory floor. He was not prepared for this line of questioning, as his answers, with wandering eyes, were vague and unresponsive. I learned that he had no set schedule. (Maybe he plays in a weekly poker game that I could attend. It would be easy to see when he was bluffing!) He claimed to work often on the factory floor, but employees later reported he was rarely there, only to introduce new employees. It was disheartening to learn he generally sat in his air-conditioned office, only leaving for lunch and breaks. When he needed information, he would summon factory workers to his office. He did not know how products were made, nor could he assist if there was a manufacturing problem, and there were many.
Problems with machinery
One machine would roll out fabric until it hit a stopper. This stopper allowed the machine to measure the exact amount of fabric required to begin the process of making a comforter. Too much and the sewers would have to cut off the excess, too little and the comforter could not be made. That stopper was quite an important piece in the manufacturing process! Sometime in the past (no one remembered when), the metal piece broke and was replaced with a piece of cardboard that wore out often. I asked the manager about replacing the cardboard piece with the correct metal one. He claimed not to know there was a problem (staff behind him rolling their eyes), and asked me to show him why the part was necessary. The manager said he would look into getting a replacement part. I knew I could probably kiss my elbow before he would do that.
Problems with mechanics
Next, I met with the head mechanic and three assistants in their workshop. Repair logs that are essential to knowing when machines need repairs were void of entries for many days, as if the plant was closed. The head mechanic began his explanation with, “But Señor.” (In my career working in Central American countries, nothing good followed “But Señor”.)
“But Señor, we are a bit behind in logging our work.”
“How many machines do you work on each day?”
“Señor, we are busy all day.” It probably will not be surprising to know the mechanics were not busy all day. They barely worked at all. Some “broken” machines just needed oil but were put in the graveyard where unusable machines go until repaired.
Some problems discovered
After working for just one week, the following was uncovered:
- Machines were not properly serviced. Many needed oil and were about to break. Some machines worked at less than full capacity; others were just broken awaiting repair. All were reparable with minor work required.
- Employees who were short in stature folded large comforters, and this resulted in dragging the comforters on the dirty factory floor. The Quality Control department (QC) rejected the damaged products and sent them to a section of the warehouse used for bad products that could not be sold. (It looked like the closing scene in Indiana Jones where the Ark of the Covenant was kept.)
- Boxes used to pack sets of sheets were too small. Each set of sheets required two people to close a packing box: one to hold the box closed and the other to tape it shut. It was funny watching one person taping another person’s arm to the box because the box holder didn’t move out of the way in time. One time, an employee sat on the box before realizing that his associate couldn’t tape the box closed with him sitting on it.
- Factory supervisors received no instructions on what to make and decided that on their own. Often, orders were not filled completely because of this lack of control over production.
An attempt to get management to get involved
When asked if meetings with management were ever scheduled, factory workers replied, “Nunca.” (Never.) After much coaxing, the factory manager finally held the company’s first production meeting. The manager sat far from the exit. As the meeting became heated over his lack of concern for the employees and their work effort, I became apprehensive his position was too far from the exit for a quick escape should the employees start a riot.
Many of the workers thanked me for that meeting. They gave me a bag of M&Ms to say thanks. Perhaps my large frame made them think candy was an appropriate present, but I did appreciate the gesture. Nothing significant changed after that trip. The bank sent me back to Torreon, where I was greeted warmly by the staff and ignored by the factory manager.
The fix!
The problems uncovered were symptoms of bad management. Hearing the word “factory” often conjures up a picture of a Henry Ford type assembly line. This concept worked at the turn of the 20th century, and with enhanced modifications works today.
- In the Torreon factory, more attention needed to be paid to work schedules and output of product.
- One solution to those problems is a scoreboard for each production line. The board has columns for expected and actual production. Results for each period (usually two hours) are reported and monitored on this board. Workers can look at the board and know how they are doing with relation to expectations. The scoreboard also acts to incentivize employees to hit daily goals in two-hour increments.
- More attention was needed in QC.
- The solution was to implement stronger QC. If product was not completed in a saleable manner, then QC would inform production that changes would need to be made in the production line to reduce the number of damaged products.
- Mechanics didn’t have service schedules that kept equipment in top form.
- The solution was to instruct mechanics to service machines more frequently, keeping them in top form. Additionally, a periodic timetable/schedule for regular maintenance schedule was created, and mechanics were instructed to record all service on the schedule.
- Meetings with key factory production personnel should have been scheduled periodically. Production staff should have been allowed to voice their opinions on improvements.
- A meeting schedule should have been established, so that production staff could be invited and encouraged to express their opinions regarding improvements.
- Management’s failure to interact with all phases of production resulted in inefficiency and poor morale.
- The manager was encouraged to conduct walk-throughs as often as needed during the workday, to be on the lookout for problems, and to correct problems in a timely manner. Had the manager conducted such walk-ins and addressed problems, the issue with packing and shipping could have been discovered and corrected much sooner.
- Additionally, the manager was encouraged to improve morale by showing production staff that he cared, simply by asking their opinions on improvements, not just during the meetings, but also during his walk-throughs. This is just common sense.
This article was contributed by Neil Goldstein, the founder of Elementary Business Inc. a specialized consulting firm for distressed businesses in transition. Mr. Goldstein works closely with owners to structure improvements in both operations and finances. With many successes in his portfolio, Mr. Goldstein focuses on the needs of the owner to achieve results in profitability, sale of the company or finding a partner for growth. As a hands-on consulting practitioner, he has personally negotiated with foreign governments for incentive programs, worked with union management to improve productivity, and restructured warehouses for efficiency and other specialized operational assignments.