Marketing and Business Strategy

The following symptoms may indicate that lack of commitment and effort is rapidly becoming a critical management issue for your team:
• Your members leave as soon as possible after quitting time each day and refuse to work overtime when needed.
• Members doubt their ability to perform. They feel overwhelmed by small challenges and routinely gripe about the lack of fairness in assignments.
• Members seem to feel that “it’s every person for herself.” They are unwilling to help each other on projects or to assist each other in problem solving.
• Whenever you ask members to take on new assignments or skill areas, their first reaction is to offer excuses why they can’t be expected to handle these new job challenges.
• You feel that your team is performing well below its maximum performance potential.

Strategies
The first strategy is to overcome inertia. An engineering friend once explained that 90% of a locomotive’s energy is expended during the first few minutes of start-up as it attempts to move the train from rest. Once the engine overcomes its massive inertia and the train is running at high speed, relatively small amounts of energy are needed to keep it in motion. In much the same way, the first job you must tackle will be to overcome your team’s initial inertia and get it started along the track. In this section we offer strategies for overcoming inertia by creating a sense of urgency, removing yourself as a buffer, conducting a performance analysis, and creating competitors.

The second strategy is to challenge the limits of your members. This strategy involves encouraging your members to raise their self ¬expectations, redefining performance, modelling limit-busting, cloning superstars, and using incremental successes and celebrations.

The last strategy is to get out of the way of team members. This involves removing any roadblocks that you may be unintentionally placing in their path. Managers get in the way whenever they hamstring a team’s authority and its control over its own work, send inconsistent messages about desired performance, or create conse¬quences that actually work against desired performance. As part of getting out of the way, you will discover how to strategically empower your staff, send clear messages about your performance expectations, and create consequences that support desired performance.

Before you read article below, you can also see:
Stress Situations Guide -1
Stress Situations Guide -2

Situation 2. Responding to Criticism
1. Put the person and situation in perspective. When people are under stress it’s easy for them to blow out of proportion any critical feedback that’s presented. If you find yourself criticized, remind yourself that the criticism addresses only one aspect of your performance and that there are many other areas in which your performance excels. If someone directs a general criticism at you, help that person focus in on more specific feedback.

For example:
Other: You’ve really got to improve the way you are managing your relationships with your customers.
You: When you say “not managing relationships effectively,” what exactly do you mean? Do you feel I’m being rude to customers? Are we talking about my entire customer base?
Other: No, you seem to be well liked by your customers, and things appear to be okay with your established customers. However, a couple of times I’ve felt that you’ve made promises to entice new customers that I don’t feel you can possibly meet. For example, I couldn’t help overhearing your conversation with ABC Corporation the other day on the phone, and I noticed that…”

2. Remember that you are not the target. If someone makes personal comments about you or criticize you too strongly, keep in mind that stressed-out people tend to indiscriminately dump on the other people. Remind yourself, “I am not the target. I just happened to be in the way when this person decided to dump on me. It’s her problem, not mine.”

3. Turn criticisms into desired aims. Criticism often takes the form of telling people what we don’t want them to do. Unfortunately, in this sense it provides little informational value because it doesn’t spell out what desired behavior looks like. Whenever you receive negative feedback, ask the person to clarify her expectations of you. If needed, provide some suggestions.

For example:
Other: That budget forecast was really a surprise. When I took it into the director’s meeting I ended up with egg all over my face. The actuals were completely out of line with your original projections. I want to make certain this doesn’t happen again.
You: Well, as you know, given the number of project readjust¬ments we’ve been having, it’s almost impossible to provide an accurate, annual budget projection. Are you saying you expect me to increase the accuracy of our projections?
Other: I realize you can’t do that, but I would appreciate being forewarned the next time around so that I can give our director more advance warning of any increases prior to the annual budget review.
You: So you want me to generate a quarterly budget projection?
Other: It doesn’t even have to be that formal. Just pull your budget trend line out of your spreadsheet package and fax it to me for review with warning flags on those areas that are beginning to run over and a handwritten note as to why. Also, I’d really like to receive that on a monthly, not quarterly, basis.

Use humor in the workplace. One of the most effective techniques for dealing with stress is to use your sense of humor to keep problems in perspective and to elevate people when they are feeling depressed. Humor can help insulate your team from even the most traumatic work challenge downsizing: An excellent example was shared by Bevan Gray, organizational development consultant for John Allen Life Insurance. Several years ago, Bevan worked with Allied Stores, which suffered a major downsizing when it was purchased by another company. To help keep morale up during the downsizing process and to provide employees and  managers with a sense of camaraderie, Bevan and several other managers decided to invite all employees to a “pink slip party.” Party invitations were given out as pink slips, and employees were asked to dress in pink (for pink slips) and black (for mourning).

The vice president of personnel was given a crown and
honored as Miss Pink Slip (she had to make some of the difficult termination arrangements and then was herself one of the first people terminated). In condition, office jokes about the situation were encouraged: “What are they going to do about it, fire us?” Pink achievement awards were given out to selected employees to affirm that, despite the downsizings, their per¬formance was appreciated.

The purpose of all of this tongue-in-cheek humor was to laugh in the face of adversity. As Bevan says, “We created an environment that said that humor was okay and that humor was what was going to get us through this thing.” Expand your team’s range of control. A significant amount of stress research shows that the more control people exert over difficult work situations, the more they are able to cope with those situations. In the work environment, you can help regulate stress by looking for ways to place control in the hands of your team.

Teach coping skills. Supply members with books and guides which provide suggestions and guidelines for self-managing stress. An additional approach might involve looking for low-cost stress management workshops that members can take after hours or on the weekends through local adult education programs, colleges or community health agencies. Periodically audit stress factors in your environment. Conduct an audit to identify factors that may be creating stress for your team. This doesn’t have to be a tedious or expensive process.

Step 7. Explanation. Budget explanations create a lot of trouble for everyone. That’s because in most cases, there is no logical assump¬tion base. So what can you say about an expense that’s higher than the budget?
In the traditional system, you might make an explanation sound good, without really saying anything at all. For example, “Actual expenses were 12 percent above last year’s level. We estimated a 5 percent increase.” This explanation says nothing at all about the cause of the variance; it only admits that the budget was too low, a fact that everyone already knows.
Unfortunately, this type of non explanation is so common that it’s acceptable. We find ourselves coming up with new and novel ways of saying nothing, so that the corporate belief in budget review is satisfied. A real explanation, in comparison, is based on an analysis between the components of actual spending (or income), and the components of the assumption base. With this method, precise reasons for a variance are quickly and easily identified. From there, it’s a relatively easy step to take action, because a cause is now understood.
A variance exists for only one of four reasons: (1) The budget did not anticipate something that happened. (2) The timing of the budget was in error, and will be offset in the future. (3) Internal accounting created the variance. This may include a coding error, an accrual, or an allocation not included in the budget. (4) The variance was predictable, but the original budget was changed arbitrarily from above or by the accounting department-in spite of well-docu¬mented assumptions.

Step 8. Investigation. In some cases, the explanation cannot be filled in by the budget review meeting, because the person or depart¬ment preparing the review (usually accounting) does not know the answer. At that point, an investigation is in order. It might be possible to assign the problem to one department, or it might be necessary to ask each manager to look into individual budget assumptions to identify the components of the variance.
Investigation is troublesome on a companywide basis. No one will want to take responsibility for explaining the variance, or for looking into it. As an unfortunate consequence, the accounting department ends up with the lion’s share of budget-reporting duty. This means that, with or without your knowledge, your department could be criticized for a budgeting problem, even if you had nothing to do with developing that budget.

Step 9. Response. Once investigation is complete, some form of response is demanded. If an expense is running above a reasonable budget level, it should be brought under control. If the problem is strictly in one department, assignment of response is simple. How¬ever, it is more often a companywide problem and, again, no one will want to tackle the problem. So the accounting department again is given the responsibility and the power to respond and to solve. The power issue wouldn’t be a problem in itself, except for the fact that you should want to control and answer for your own budget.

Step 10. Review. Once a problem is discovered and the process of correction is entered into, the review process begins. This is a year-¬round, never-ending, ongoing effort, one that should be instituted as a daily priority and as part of your routine. The idea of monitoring the budget is too often delegated, or thought of as an unpleasant and inconvenient demand on our time. Think of the control and review process not as manipulation of rows and columns of numbers, but as real and tangible events and financial consequences-that you can and should control as part of your job.

Variances, properly used, can give budgets a new purpose. Companies need to look on variance reporting not just as a means for calling managers to account for problems, but a way of turning that budgeting process into a profit center. Suggesting this perspective to top management will turn heads and gain attention. It is a good idea and it works.

There are a number of steps you can take to achieve the benefits intended from the budgeting process, and you will see tangible results at once:
• Respond to discovered variances. When you discover that an account in your department has a significant variance, take immediate action. Identify the cause of the problem and fix it. If the variance is significant in either direction, it deserves a careful look. And when you find the answer, your task has just begun. From there, you need to decide what actions are appropriate; then you need to follow through and take those actions.
• Build control ideas into assumptions. If you think of budget¬ing as a function outside what you actually do, then you have missed the point. In fact, budgeting should be (but rarely is) an ongoing exercise in control.Typically, the budget comes up only at the end of the month, when a variance report is prepared; or at the end of the fiscal year, when you’re reminded that, once again, it’s time to stay late and start filling out worksheets. But suppose you have a problem keeping expenses down, so you correct the problem. The budget assumption for that expense category might be the logical starting point for getting your accounts under control, assuming your control ideas work.
• Modify to correct, not to avoid problems. Unfortunately, budgeting priorities might prevent you from achieving this. How should you respond? Get in there and solve the problem. If the budget is reasonable but employees are spending more than they should, put a preapproval system in place. If the budget is simply wrong and the spending level is right, document that fact as part of your explanation. In either case, don’t let the problem go. And don’t complicate the real reasons for the problem by providing an accept¬able answer that doesn’t really say anything. That only prevents anyone from knowing what should be done.

Step 4. Sales forecast. The sales forecast should precede the cost and expense budget. Because your business and marketing plan is based on assumptions concerning an expanding market, the sales number should be developed as a first step. In many companies, expenses and sales are budgeting separately, which makes no sense all. Sales forecasts should be broken down by market, by month, and, if necessary, by sales office or other “unit of production” in your marketing arm. This enables you to later identify causes of variances.

Step 5. Budget. The cost and expense budget is based on intelli¬gent assumptions related to the nature of the category. But in addi¬tion, the budgets will be directly affected by sales levels and timing. For example, if you believe that the summer months will experience a much higher than average sales volume, then it makes little sense to spread operating and variable expenses evenly throughout the year. You will then have timing differences in your budget. While these may not be major problems, they do cloud the important issues, often hiding real unfavorable variances from view.
Often overlooked in the budgeting process is the importance of cash-flow projections. Once you have completed a sales forecast and cost and expense budgets, you should next develop the year’s cash-¬flow projection, as part of the test to see whether the plan will work. What could go wrong? Cash flow will be affected by any number of situations. For example, what if you need to invest in capital assets? What if the new sales volume occurs on account, but related costs and expenses must be paid monthly? What if your inventory level has to be doubled in the first quarter? All these events will demand addi¬tional capital. You need to ensure that you know where that capital will come from.

Step 6. Monthly review. This is a process of comparing actual to budgeted outcomes. The review should involve sales forecasts, cost and expense budgets, and cash-flow projections. Without the monthly review, you are not going through the budgeting process at all. Instead, you’re letting the effort go to waste. Only by looking at the numbers can you tell whether the plan is working.
The review can be simplified to a great degree. This is most desirable. You don’t want to keep a room full of busy managers and executives sitting for hours while going through a large volume of detail. All you need is a report showing each category in three columns: actual, budgeted, and the variance. If the variance is minor, no action is required. But if the variance is unacceptable, proceed to the next step.

The budgeting process is not just filling out blank worksheets, with columns for every month and rows for each expense classifica¬tion. That’s only the beginning, the very first step in a more compre¬hensive operating system. In fact, the visible budget worksheet is only the first of three major steps in the complete budget.

The second step is the monthly review. The budget becomes worthwhile only when the managers of each department sit down together and review the budget in the light of what actually hap¬pened in all the revenue, cost, and expense categories. In this review, any variances are highlighted and explained.
The third step is the follow-up action that is taken when an unacceptable variance is discovered. This is the most critical step of all; it is where the real profits are maintained and created.

That is the budgeting process in overview. A more detailed, step¬ by-step explanation is given below:

Step 1. Plan. A properly prepared budget grows from a well¬ defined business and marketing plan. Without a plan, the organiza¬tion lacks direction. And without direction, the budget will be arbitrary.
The plan explains the current year’s marketing goals. The fore¬cast and budget are the financial expression of those goals, and they demonstrate that the goals are practical and can be achieved. The plan does not suggest that the numbers will fall exactly as shown, or even close. It does show that the plan is realistic and that it can be achieved. The numbers work.

Step 2. Goals. Setting goals as part of the plan is a logical and necessary step in the budgeting process. We should keep in mind that, in spite of the way things were done in the past, the worksheets, filled with numbers are only part of the whole. Those columns and rows should represent the financial expression-and realization-of clearly stated goals.

Step 3. Assumptions. The key to budgeting is developing intel¬ligent assumptions. For example, a sales forecast makes sense only when broken down by its component parts. So for example, if sales are generated by salespeople in the field, it makes sense to forecast based on assumptions about recruiting, attrition, and average pro¬duction. Expense budgets should be developed based on the components that logically constitute each category. The variable expense groups may vary with sales activity; overhead expenses are developed according to some logical pattern. Abandon the usual base for budgeting: percentage increases spread evenly throughout the year. These are useless to a need for analysis that will arise later in the year.
It also makes no sense to use the past, especially if the budget didn’t work. Ask yourself, if last year’s expenses exceeded budget, why are you using that outcome as the basis for the coming year? That’s building in excessive expenses rather than creating controls to reduce the spending level.

In market positioning, the second phase of the positioning process, the marketplace reacts to the new product. The company finds out wheyher its product positioning is working. Winning a quick endorsement from the market us critical to success. Once a product wins reviews, it picks up momentum in the marketplace. Success builds on itself. The product develops a positive image, and customers flock to it. On the other hand, once the market sticks a product with a “loser”, the product has a tough time recovering.

Clearly, companies have much less direct control over this stage of the positioning process. Market positioning is determined largely by the perceptions of the marketplace. Customers build  a certain image of the product, and no one can argue with their decision.

It is possible, however, to influence the market-positioning process. By understanding the workings of the market, companies can influence the perception of their products. They can take steps to make themselves and their products seem more credible.

The process might seem backward, but in some cases it`s the only way it can be done. With ground-breaking products, customers can`t know what they want until they have seen the product. But after trying the product, they can suggest modifications so the new product or technology fits their needs.

When the first personal computers came to the market, for instance, people didn`t know how they might use the new machines. A market research study would have shown very little demand. But a few pioneering companies put personal computers on the market, people came up with suggestions on how to make the machines better and put them to new uses.

The same things happens with many new semiconductor chips. Semiconductor companies rarely go to customers and ask: “What do you need?” Rather, they take spec sheets to certain key customers and say: “Here`s what we can do. How should we modify it to suit your needs?” Successful semiconductor devices often go through ten or twenty revisions during the life of the product. the experimentation never stops.

Beta sites, the locations where a company first tests its product, can be critical in this process. By working with beta-site customers, companies can begin making modifications to the product before taking it to the market. Oftentimes, the beta-site customer will hate the product at first. But as their suggestions are implemented, they fall in love with the product. When the product is finally introduced to the marketplace, it is much more likely to make a good first impression. And that`s important, as you never get a second chance to make a first impression.