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Accountability and profitability for businesses

TORONTO, Ont. - Despite a strong economy, uncertainty still exists for businesses in all of their activities, according to George Edwards, president of George Edwards & Associates. Edwards gave th...

TORONTO, Ont. – Despite a strong economy, uncertainty still exists for businesses in all of their activities, according to George Edwards, president of George Edwards & Associates. Edwards gave the keynote speech on accountability and profitability at the Markel National Conference in Toronto, Ont. in May.

In order to be successful, Edwards said leaders and managers must be diligent in keenly evaluating all processes and how the firm is accomplishing daily tasks and activities.

“When firms are operating at near capacity or at 100%, it is quite easy to overlook inefficiencies in an all-out effort to satisfy customer demands,” Edwards said. “Maintaining margins in dynamic growth periods dictate that we focus on obtaining quality revenue and actually increasing profit margins. Accountability of functional responsibilities is absolutely essential to sustaining profitability.”

One way to help achieve these goals is by assessing the corporate culture. By ensuring all members of the organization have a sense of belonging and feel like an integral part of the family, feelings of cooperation, collaboration and teamwork can be achieved.

“This requires that the leader check his or her ego at the door first thing in the morning,” Edwards says. “The ideal corporate culture nurtures trust and respect throughout the organization.

As well, evaluation of the customer base is a “must-see” area for businesses, Edwards says. No firm can be all things to all customers, so they must determine their niche and identify strengths, weaknesses, opportunities and threats quickly.

Other key areas to evaluate in niche compatibility are examining the geographic areas served, product compatibility (including ease of handling, special routing requirements, security risks, and drop and hook arrangements); revenue and cost relative to services provided; and utilization of resources (by examining potential problems like excessive deadhead or waiting times, and rate levels).

Vendor relationships can be a very fruitful area to investigate according to Edwards. He suggests looking at the number of vendors utilized; the terms of sale, including pricing structure, payment schedule, transportation arrangements and service standards; as well as creating long-term strategic alliances with key supportive vendors.

Analysis of the maintenance area of the business can provide some of the largest savings available to motor carriers, says Edwards. There are four primary areas on which to focus when evaluating the maintenance area. The first is the warranty and policy program.

“Companies leave big bucks on the table because warranty claims are not filed timely and correctly. Persistence pays off big time,” Edwards says.

A preventive maintenance program can both extend the life of equipment and reduce the cost of maintaining the equipment, as well as adding to its aftermarket value.

Shop efficiency is one of the greatest cost drains in the entire maintenance area, according to Edwards.

“There is far too much idle time that can result from ineffective leadership and management on the shop floor,” Edwards says.

To operate efficiently, proper supervision is needed, which includes having the right leader for your business to instigate effective planning, scheduling, implementation and follow-up.

In the parts department, Edwards suggests checking for excessive inventory and outdated inventory – both of which can be costly.

Safety and accident prevention is also key for running a profitable business.

“Safety must be the watchword throughout the company,” Edwards says. “The accident prevention program must be very aggressive in getting the word out to the drivers.”

There are two key elements that determine the cost of the insurance premium, according to Edwards: frequency and severity of accidents.

“While a motor carrier may not have a record of severe accidents, the carrier may in fact have an unenviable record from an insurance perspective because of the absolute number of incidents and minor accidents in which it has been involved. The insurance actuary will point out that because of the frequency in which the drivers have been involved in a number of accidents and incidents, regardless of the severity of these mishaps, that it is just a matter of time until the occurrence of a major accident. Therefore, the premium must be set aside for the protection of that risk.”

As well, when a rewards program is in place, in order for it to be effective, the program must have integrity and complete objectivity Edwards says.

“There must be no sacred cows,” he says. “Any chargeable accident or incident must be a matter of record of the individual involved and if such an event disqualifies that driver from the award(s) in question, so be it. An awards program without honesty, integrity, and objectivity is worthless and will not be effective.”

Internal accounting practices afford many possibilities for achieving improvements in the internal processes of the motor carrier, Edwards says. Carrier leadership and management must insure that the refined and proper processes are in place and working.

This can be used in conjunction with a disciplined monthly financial review and variance analysis.

“At the outset, this begs the question of a budgeting process being in place,” he says. “Yes, it is very important that a budgeting process be in place and that the financial reports be available for review within five to eight working days after the close of the respective month in question. Actual expenditures must be compared to the budgeted amounts for all revenue and cost categories listed in the financial document.”

And finally, training programs, which Edwards says must be viewed as an investment, not a cost.

“It is true that there is a price tag attached to each training session undertaken by any organization. However, if an organization desires to maximize the results of implementation of any improvement endeavour, the people working with the devices, techniques, and/or methods of that endeavour must be fully trained.”

Edwards says the elements in his presentation can generate significant savings and benefits when implemented and utilized in a disciplined and logical manner, but most of that responsibility rests on the shoulders of management.

“Will implementation and continuation be easy? No. The success of an efficiency enhancement and cost reduction effort starts at the top. The leader of the organization must be totally on board. He or she must be committed, involved and active in the day to day management and administration of the effort. The leader must also be a cheerleader and morale booster when needed to lift the spirits of team members. The speed of the pack is determined by the speed and consistency of the leader.”

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