A bias toward action
By CRP Partner Gene Baldwin, as published in Franchise Times
Operating a multi-unit chain is a very challenging career. A good operator gets things done. These professionals work on the "nuts and bolts" of the business every day. The job is more tactical than strategic. It is more practical than theoretical. Good operators take the situation they are given that day and work really hard to provide the best service to customers and most profitability for their employer.
In many ways the job of the operator is similar to that of a football coach. The team's owner and the general manager are responsible for the organization of the club and they supply the coach with players. The coach must get the most out of the players he is given. Not every one of them is an all-star. Some are injured so they cannot play on that important Sunday. The coach is then forced to use backup players who may or may not be adequately trained and skilled for the job ahead. Even when the starter is out on the field, he can have a really bad day and the game is lost. Many times the coach loses his best players to free agency. Finally, conditions on the field may not be ideal. Rain and snow can make the field nearly unplayable. Through all the adversity, the coach is still supposed to guide his team to victory week-in and week-out.
A multi-unit operator has many of the same challenges. Customers must be served in a consistently excellent way each and every day. Hourly employees are notorious for being no-shows. Adverse weather conditions can dramatically affect sales and profitability. The building and equipment may need repairs. The owner or senior management may not give the operator the resources needed to attract the best people, and when the operator does develop an all-star, the competition is right there to make that manager or staff member a better employment offer.
One of the best traits of a good operator (or football coach) is an attitude about business that is biased toward action. They cannot afford paralysis by analysis. If they do get locked up by inaction, the business can really suffer. I recently encountered two situations where companies were badly damaged by procrastination.
The first situation involved a small department store chain managed by the third generation of ownership. The CEO was very intelligent but was formally trained as an attorney and he did not grow up in the business. After several years of much turnover in senior operating management and declining sales, the business desperately needed to be refinanced or sold. Term sheet after term sheet came forward from lenders and investors. The provisions of those offers were never quite good enough for the CEO. He did not recognize that continued loss of liquidity was jeopardizing the viability of the organization. This CEO managed by analysis, negotiation and procrastination. I am firmly convinced that a good operator would have recognized the precarious nature of company's financial situation and would have made a less than perfect financing arrangement to save the company. The result of CEO's inaction was a loss of confidence by its vendor community who eventually stopped shipping product. (You really cannot hide from your vendors. They know your financial condition by the level of product they are shipping you compared to historic standards. If your purchases are down, sales and profits must be down too. Also, regardless of what they say, vendors talk among themselves and compare notes about the financial condition of their customers.) Once vendors stopped shipping, the going-out-of-business signs came out very quickly.
The second situation involved a small retailer that expanded too fast and was forced to close stores and retrench operations. Here again, the CEO was not a skilled operator with a bias toward action. It took him much longer than necessary to recognize the seriousness of the situation and take the direct and immediate action to close stores, terminate unneeded employees and liquidate excess inventory. Even when the retrenching actions started they were not executed quickly and decisively. His delay cost the company thousands of dollars and only postponed a positive move forward to greater profitability.
The lesson of these two stories is that operators must gather all the information necessary to make the right decision and then they must act quickly based on that information. Once the decision is made, the operator must be committed to his chosen course of action. I sometimes think it would be good if business leaders had a 30-second clock, like they do in football. If there were such a clock, I think better and timelier business decisions would be made.