The primary purpose of business management needs be to improve the most important number in any company … the net profit margin.
High net profit margins (> 10%) ensure financial viability better than anything else.
With this primary purpose in mind the key is to then focus on the elements that increase this important figure with management of staff and systems.
Staff need a feedback mechanism to perform at their best. A manager can be the feedback mechanism, but staff are prone to not agree , especially on the subject of performance.
A better solution is to have every employee accountable to a K.P.I. (Key Performance Indicator).
By assigning KPI’s for each person both the manager and the team member can agree on what is acceptable performance. The KPI’s then become the measure of the system and/or employee’s performance combined.
KPI’s need to be implemented for every system facilitated by every person including systems for measuring.
A manager’s purpose is thus to improve the systems and improve team member’s performance, who are simply a by-product of systems evidenced by the KPI’s.
With KPI’s in place the ultimate measure of the systems, employees and KPI’s, and skills of the manager/owner is evidenced by the net profit margin.
Net profit margin improvement comes from refining and improving what each person in your company currently does, not from hiring more people to do more of the same.
For example, the ways in which your staff greet customers on the phone, their rapport building skills, the words they use, then words in quotes, or what words you use in your signs or on your website, these are the areas along with many others you should be continually trying to refine as systems.
Having documented systems in the form of policies and procedures for every individual role in your company is Important to improve the company’s net profit margin. A procedure is simply an identified “best way” of carrying out a task that others can learn from or do to duplicate similar great (and consistent) outcomes . Right and wrong terminology or lbaelleing of tasks should not exist in any business, instead the terminology needs to be… improve, better, better, best way systems.
Right and wrong terminology infers there are two ways of doing anything when in fact there are dozens of ways, each one better than the previous way until a “best” way is found; and then only until a better than “best” way is identified.
Management is about understanding employee’s personality and how well they respond to various challenges. The more you look into personality types the more you realise why people do the things they do and what skills they naturally have for certain roles in a business. With this insight you soon see how effective it is to match a person’s personality to a role within the business, instead of putting round pegs in square holes as they say.
For example; extroverts are better at multi-tasking roles such as sales or management whereas introverts are better at high detail and quality work necessary for production.
Add another dimension and you can see that 50% of people are independent and prefer to work alone without talking whereas 50% of people love to talk to others at work. Combining extroverts, introverts with independent, people orientated preferences and you soon see how powerful this principle is in any company .
This concept is a simplified version of DISC profiles, which has been proven (by my business development company and others) to be one of the most dynamic tools in business there is. DISC has stood the test of time better than any other, as it was initially discovered over 2,400 years ago!
DISC can be used for recruitment of staff , for matching job roles to profiles. When you master DISC profile understanding you master managing people their best way, depending on their profile, which increases the team member’s outputs significantly . Outputs mean more work done in the given time, which increases net profit margins.
By studying DISC profiles you soon realise that each person in your company needs systems for their role at different levels, you also understand you need to communicate and teach every person in their own unique way.
Unfortunately there isn’t space here to go into DISC profiles at the necessary level to become a masterful manager, nor to go into the 7 Emotional Needs of People your staff } (especially when matched to DISC profiles), however I’ll leave you with these thoughts…
The most important number in your business , net profit margin, is what you need to be focusing on more than anything else as an owner. The way to increase it is to improve on numbers generated by people’s activities. In fact the more numbers you have staff accountable to the greater their performance is likely to be, as numbers never lie and people assume anything.
Having numbers in a business make management of the business easier to make empowered decisions that lead to an improvement of net margins. That’s the key to effective and rapid net profit margin improvements and for your small business management.