How do you transform a business?
Companies typically call us in when they are having a problem and they are not able to solve it themselves. For shippers, the problem is usually that they are spending too much money on freight and are seeking solutions to bring these costs under control. For carriers, the problem is that they are not achieving a satisfactory profit.
In our work we have observed a number of variables that play a key role in determining whether the problem or problems get solved or not. Here is what we have learned.
It takes a multi-disciplinary effort to solve these problems
While one might think that freight transportation is a small element of a company’s operation (and often less that 5% of its costs), it tends to intersect with Sales, Production, Customer Service, Finance and other business functions. The same can be said for improving the profitability of a trucking company. Profit improvement comes from a team approach to solving the problem. Improving one area of the company while leaving the others untouched will usually have a minimal impact on a company’s bottom line.
It starts at the top
There are companies in the freight industry that routinely replace their President or VP of Sales every year or two if the results are not up to expectations. They often forget that revenue growth or profit improvement comes from providing great service, from having well-trained and motivated sales and operations teams and from providing customers with some added value to differentiate the company from its competitors.
If you look for a quick fix, you may miss the boat
Our clients are often looking for the “magic bullet.” As we do our work, they will frequently ask, have you found the “low hanging fruit” that we can convert into immediate profits. In many cases we find some specific activities that can be corrected quickly and have a short term impact. However, sustained improvements frequently come from making changes that will have a lasting and positive impact. These changes tend to be in a number of key areas.
Transforming a company requires changes in People, Processes, Culture and Metrics
As mentioned above, replacing a weak performing executive will have a positive short term impact. But if a company has a dysfunctional culture, inefficient or effective processes and/or the wrong metrics, the changes won’t be sustainable.
The leader needs to create a culture of openness and collaboration. Those companies that rigidly stick with outmoded business philosophies, a lack of communication and a fear of telling the “emperor” that he is “not wearing any clothes” are doomed to fail.
If the changes that are required to improve results are not institutionalized, employees tend to revert back to their non-productive former ways of doing things. Some companies seem to go on “missions” where they take action on a problem for a period of time. Then the company embarks on another “mission,” without cementing the processes employed in the prior mission. The end result is that results improve for a month or two in the area that receives executive attention and then regress as the executives focus on another area.
Metrics are a key part of achieving success. Successful trucking companies have to know their true cost per mile and the factors that are restricting them from hitting or surpassing industry norms. Firms that have inaccurate data or do not focus on the right metrics, can remain stuck in a swamp of consistently poor results.
A willingness to listen, learn and act
The company leader has to be willing to listen to his employees or advisors, understand what is restricting superior performance and then take action to achieve superior results. These actions may include a combination of culture, process, metrics and people. It starts with gaining a true appreciation of the combination of factors that are hurting results in each company.
Overcoming the tug of war between dissatisfaction with the current state and a resistance to change
In every company there are internal forces that are resistant to change. The biggest obstacle may be the CEO or President. “Push back” can from a multitude of other employees who can sabotage any change management initiative. Success comes from a simple formula.
D + V + C + A must be greater than R
If the level of Dissatisfaction (D), coupled with the Vision of an improved company (V), a Commitment to change (C) and a willingness to Act decisively are greater than the Resistance to change (R), a Business Transformation can take place. If not, the “mission” or initiative or campaign will likely not have a permanent impact. If these forces drive permanent changes in People, Culture, Processes and/or People, the end result can be very positive and exciting.
There is only one week left to register for the 2013 Surface Transportation Summit and receive the “Early Bird” rate. Click on the link to see the agenda and impressive list of speakers.
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