Do ERP’s and CRM’s help a business or do they just pretend to?

Do ERP’s and CRM’s help a business or do they just pretend to?

If you’re not familiar with the terms ERP or CRM, chances are you’re running your business in a very manual way. That’s not a bad or good thing.

In today’s article, we’ll explore what they are, why so many companies use them, if they really help a business improve and more importantly, if you should be using one.

ERP’s and CRM’s, what are they?

ERP (Enterprise Resource Planning) software is designed to centralise data across multiple / all business departments to aide in process automation, reporting, collaboration and much more. Ideally, it allows greater visibility and understanding of your business.

A CRM (Customer Relationship Management) system can be found within an ERP or be a standalone product. Typically, a CRM is useful when a business is looking for better insights into a customer’s buying journey, what converts them, what repels them, and how to nurture them into paying clients.

So why do so many companies use them?

In our experience, there are many reasons a company may choose to use an ERP or CRM. Here are some of the common reasons we hear:

  • To improve efficiency throughout the business
  • Have more data about the business
  • Better tracking of projects, materials, staff etc.
  • Centralised data instead of using multiple spreadsheets, usually saved locally on multiple computers making it difficult to update and track versions.
  • Reduce the number of software applications used within the business
  • Automate as many areas of the business as possible
  • Other people in the industry are using one, so we should too

When it comes down to it, every business we talk to is really trying to achieve a common goal. That goal is, to improve.

Do ERP’s and CRM’s help a business improve or is it all a fancy show?

There’s a difference between effectiveness and efficiency. Effectiveness is about doing the right things; Efficiency is about doing things fasters, with less effort. If you’re not doing the right things, then there’s no point in doing them faster!

ERP’s and CRM’s can assist with all the reasons listed above, but, beware, they can also speed up ineffective processes!  If your current processes and business flows have not been optimised in terms of effectiveness you’re likely to spend a lot of time, money and effort in customising a system to replicate this.

Since a lot of your processes can be automated, it will naturally feel like you’re making some real positive steps towards the improvement goal. If it feels like things are running faster after implementing an ERP or CRM, it must surely mean they are, right?

Think of the following scenario: if you were asked to get from one side of a football oval to the other, how could you go about it?

You might decide to walk around the oval until you reach the other side. It’s one way, but not the most effective way. Let’s say that’s how many businesses currently operate. Now, if you were to run instead of walk, following your original path, you’ll get there faster. This is similar to implementing an ERP or CRM.

Have you reduced the steps taken to get to the same destination? The answer is no.

What if you simply walked through the oval to get to the other side? Not only would you get to your destination faster, you would also eliminate a lot of unnecessary steps along the way. This is what it means to optimise your business processes and flow.

As great as ERP’s and CRM’s are, they’re only as good as what you program them to do. Paying for one of these systems and asking it to follow your current path, if not optimised, will likely result in minimal return for the time and energy spent implementing it…enough to fool many into believing the tool is the answer.

Very often, implementing an ERP or CRM will be much more complex than the salesperson makes it sound, and cost many times greater than the original budget forecast. Beware: there are many cases where, after spending many thousands of dollars, businesses have given up on trying to implement an ERP system as the cost of implementation was a bottomless money pit, consuming loads of time and resources.

So… Should you be using one?

Business improvement is a way of thinking, not an outcome of a tool. As you know, a tool is only as good as the person using it. In saying that, should you be using an ERP or CRM? We believe using one of these tools is usually more a matter of when than if.

If you’ve optimised your processes and business flow, implementing one of these tools can be one of the best decisions you’ll ever make.

If you’re thinking of investing in an ERP or CRM but aren’t sure if your business is ready for one, reach out and we’ll will give you a complimentary 30 minute Discovery Call to help evaluate your suitability. Don’t worry…we’re not affiliated with any ERP or CRM supplier…we just don’t want to see you fall into the traps we’ve seen others fall into.

If you’re already using one but aren’t getting the returns you envisioned, email us at to organise a virtual/in-person site visit to uncover why.

Are your KPI’s driving the wrong behaviour and results?

Are your KPI’s driving the wrong behaviour and results?

By Dennis Keay

Key Performance Indicators (KPI’s) are an important part of growing a healthy and successful business, and relate to the old adage:

You can’t manage what you can’t measure.

That doesn’t mean all KPI’s are appropriate or useful! That’s because there’s another equally important adage, attributable to Einstein:

Not everything that can be counted counts, and not everything that counts can be counted.

There are two main traps people fall into:-

  1. Measuring the wrong things
  2. Measuring too many things.

Measuring the Wrong Things

What do I mean by measuring the wrong things

An example I came across when working for a large automotive manufacturer was measuring the ‘number of warranty problems fixed each year due to design or manufacturing issues’.  I remember having a discussion with an Executive Director who wanted to INCREASE the yearly target of problems we fixed each year, thinking that that would improve quality and customer satisfaction.  My argument was that this was an inappropriate KPI because we should be aiming to create FEWER problems to fix in the first place…a completely different way of thinking…addressing the root cause, not the symptoms.

The problem with the metric, as it stood, was due to yet another adage:

What gets measured gets done.

It’s human nature for someone to try to achieve a KPI target that they’re being measured against and rewarded for (or punished for missing). When an inappropriate KPI is inserted into an individual’s Performance Plan by a superior (whether they agree with that KPI of not) there’s pressure for them to achieve it. Terrible as it may sound, the KPI I mentioned further above led to a practice of some people NOT fixing problems completely the first time round, just so that they’d get a tick in the box for ‘fixing’ it the first time, and a second tick in the box for fixing the remaining bit at a later date.

The other aspect to measuring the Wrong Thing is whether we’re measuring lead of lag indicators.

A lead indicator is something you can measure that gives you a prediction of future performance. For example, the number of people who smoke cigarettes may give you an indication of future lung-cancer rates. With such predictors corrective-action plans can be put in place.

A lag indicator is after the fact! An example may be a company’s tax return where the accountant reports on what already happened, with no ability to influence the result.

You can think of lead indicators being related to ‘cause’ and lag indicators being related to ‘effect’, so, as you can imagine, lead indicators are preferable because they can assist proactive actions to influence outcomes. 

Another aspect of measuring the wrong things is creating conflicting metrics. By way of example, in a game of soccer, a team wins when they score more goals than their opponents. When the team knows that their sole objective is to win the game, they work as a team.

But, suppose that the each team member were rewarded based on the number of goals they personally kicked (regardless of whether their team won or lost). What would happen then?  Do you think that some players would attempt shots at goal they had only a very slim chance of achieving, rather than passing the ball to a team mate who was in a much better position to score? Of course they would! It’s obvious! Also, it would be very unfair for people in the backline who never have a chance of kicking a goal, and would no doubt set up some internal jealousy and conflict within the team.

We can see in the above example how conflicting metrics lessen the team’s chance of working co-operatively and winning the game. But when it comes to business, metrics, targets and rewards are often set to reward individual performance at the expense of business performance!

As examples we see:

  • Setting Revenue Targets for sales people while ignoring profit and cashflow. (Here’s why:  If you want to more than double your revenue, then halve your prices!  You’ll probably sell 10 times more, increase your internal costs and complexity, AND go broke!)

    I was called in to help a company after they’d inadvertently fallen into this sort of trap. The sales person had a great reputation for clinching the deal, but was often selling (knowingly or otherwise) below cost. That made his bonus healthy while making others in the business extremely busy, frustrated, and often unable to deliver on time. Meanwhile the business was making a net loss.  (You can download our ‘Hidden Cost Minimiser’ document here that includes this case study.)
  • Production Managers rewarded based on production volumes achieved, regardless of whether he or she has let quality slip or delayed critical equipment maintenance to achieve the targets. Both of these can lead to extensive costs to the company at a later date!
  • Purchasing Managers rewarded based on getting the cheapest prices regardless of the cost of delays to projects, purchasing inferior materials, or damage to the supplier’s ability to make a fair profit.
  • The HR Manager rewarded based on the number of people trained, regardless of the effectiveness or results from that training.

The list goes on and on!  We need to determine whether or not what we’re measuring and setting as KPI’s is helping us improve our results. If not, it’s a waste!

So, fundamentally, why don’t those who are setting the KPI’s and targets see what’s happening and address it?  The answers are many, but it’s usually a combination of:

  • Complacency and Precedence: ‘That’s how we’ve always done it!
  • Conformity: ‘That’s how everyone does it!’ (i.e.  other businesses)
  • Ignorance: Lack of understanding of conflicting metrics (behavioural root-cause and effect)
  • Self-interest: Those who set the targets focus on ones they can achieve and are rewarded for. (Ouch!)
  • Short-termism: Again, lack of understanding, and/or self-interest where some people are looking for the next business to go to or the next ladder to climb. (Double ouch!)

Measuring Too Many Things

Let me simply reiterate:

Not everything that can be counted counts, and not everything that counts can be counted.

There are many things we can measure, but measuring too many things can be a waste of time and resources. Often ‘less is best’.  Measuring too many things can simply be distracting. We need to measure as few things as we need, to help us improve performance, and no more.

Summary Thoughts

  1. In general, team-based metrics help drive co-operation and business performance better than individual performance measures.
  2. Metrics at Senior Executive / Department Head levels are normally cascaded town the chain. If the metrics between departments conflict with each other (as is often the case), then this can create rivalry and conflict between Department Heads and departments, rather than co-operation. It’s important to choose metrics (and reward systems) at this level very wisely, because if you don’t, it’s a great way to screw up your business.

If you would like an outsider’s view of whether your KPI’s are hurting or helping your business, you can reach out to us here.

Trained your team but not getting expected results? Here’s why.

Trained your team but not getting expected results? Here’s why.

By Dennis Keay

After putting their people through various ‘registered training courses’, business leaders rightfully expect to see results. However, regardless of how good the training is, there’s often one or more missing pieces of the puzzle that prevent those results occurring. If that’s happening in your business, here are some of the common causes and what you can do about it.

Causes

  • Training is often ‘theoretical’ rather than experiential, so knowledge is gained, but experience isn’t. The training covers the ‘tools’ but not the ‘how’ to apply them.

    You can teach someone about what the gears, steering wheel and brakes do in a car, but that’s completely different from teaching them to drive. Knowing and doing are two different things.

  • The training isn’t in ‘context’. You need to know not only how to use the tools, but when and where to use them.

    You can teach someone how to change a flat tyre, but if you have a flat battery, knowing how to change a tyre isn’t going to help! 

  • Training is focused on training, not business outcomes!

    If you think about it, schools and training organisations are there to train. That’s their objective! (In fact, for some training organisations, their objective is solely to make money, regardless of the quality of the training, but that’s another story.) The training institution usually doesn’t know anything about your particular business nor care about your specific results. They consider their job done when the training box is ticked.

  • There are significant gaps between what is taught and what your business actually needs. That implies that a training-needs-analysis has missed the mark somewhat. This tends to happen when a proper needs analysis hasn’t been conducted and there’s false assumption that the training will simply lead to results. Sometimes the training is entered into because the sales-person was convincing or there was a monetary incentive (e.g. government support) provided as an apparent offer too good to refuse. This can be false economy!

  • The student’s knowledge and experience with what they’ve learned is fine, but they aren’t given the freedom to apply it properly because their manager isn’t confident that it will work, OR in some cases are worried that it ‘will’ work and they’ll be upstaged by their junior.

  • A little knowledge can be a bad thing…the wrong tool at the wrong time in the wrong place consumes time and resources and can cause more problems than it fixes!

  • The training itself is poor, and delivered by someone who lacks real-world experience. They may or may not know the theory, and don’t know how to put it into practice!

We know these things because this is what we’ve observed over the years when companies come to us. This is usually after having had their employees ‘trained’ elsewhere and not experiencing the results they expected, yet they still have the desire to improve the performance and results in their business.

The point is, effective training is critically important, but it’s only one leg of the stool. For substantial business results it needs to be applied properly to real-world problems, in the right place and at the right time. That takes experience!  To sum it up, let’s just say that you can’t learn to ride a bike by reading a book!

The solution

Start by identifying what’s holding your business back from what you’re trying to achieve. That’s not always so easy to do if you’re too caught up in the daily operations of business and / or haven’t got all the necessary expertise in that area. Sometimes it’s best to get a set of experienced eyes from outside the business to help you. 

Identifying what’s holding you back requires an understanding of where you want to be (business goals), where you are, and a gap analysis. The ‘where you are’ bit requires an objective assessment.  We use our Diagnostic Assessment process + experience to do that, here is one you can try on your own.

From the above, we can help you determine what puzzle pieces are required to bridge that gap. Appropriate training is usually just a small fraction of what’s required.

How top CEO’s and Leaders benefit from being coached.

How top CEO’s and Leaders benefit from being coached.

By Dennis Keay

Top performers, whether it’s in sports or business, need a coach.  That’s what Bill Gates, former CEO of Microsoft, and Eric Schmidt, former CEO of Google both state, though Eric admits that he wasn’t always of that opinion.

In fact, Eric tells the story of when he first became Google CEO and one of the Board members told him he needed a coach. His first reaction was. ‘No! I have all this expertise, I’m a highly qualified established leader with a proven record! How could I possibly need a coach?’

After accepting the argument that many outstanding performers, in all walks of life, benefit from having coaches, he relented and started working with an outstanding coach, Bill Campbell. It’s not that Bill could do Eric’s job better than Eric could, but he did help Eric get the most out of his high performance team and the business as a whole. (If you want to learn more about Eric’s story and his brilliant coach, Bill Campbell, you can read ‘Trillion Dollar Coach’ by Eric Schmidt and others.)

When I started my business, Lean Logic, early in 2006, I didn’t think I needed a coach or mentor either…especially since my business included coaching and mentoring business leaders and their teams, and, after all, by that stage I had a Bachelor of Engineering degree, around 20 years of engineering and management experience, a Master of Engineering Science degree, an MBA, and a Cert IV in Training and Assessment. Why would I need a coach or mentor? In fact, I initially felt that if I had a coach or mentor it would be an admission of inadequacy of some sort, and was embarrassed at the thought of that. Something to do with foolish pride I think.

I realised that that point of view was holding me back, as a few things gradually dawned on me:

  1. We all have blind-spots, and by definition, we can’t see our own. So, to improve our performance we need other experienced eyes to spot them and provide feedback to us. (This is a key reason Bill Gates says that everyone should have a coach.)

  2. No one is an expert at everything, but the broader my expertise could become, the more I’d be able to help my clients. The fastest way to learn is to be coached and mentored.

  3. Then there’s congruency: How could I preach to others the benefits of having me coach and mentor them if I didn’t truly believe that coaching and mentoring was the most effective way for them to improve their business? And if I did believe it, which I obviously do, then surely I must practice what I preach!

So, I started engaging high-level coaches and mentors of my own, experts in their own right in their particular disciplines, and I have learned an enormous amount from them over the years.

I’ve been talking about coaches and mentors, but I haven’t told you what I consider to be the difference between the two, so here it is:

  • A COACH challenges your way of thinking and acting by asking you questions, and knowing the right questions to ask. They DON’T need to know the answers! They help you self-reflect. They do not have to be subject matter experts or be able to guide you, though they can set tasks for you to complete.
  • A MENTOR on the other hand, is an expert in their field…a field that you desire to become more proficient in. It’s their expertise and mentorship that allows you to rapidly acquire knowledge and apply it most effectively to develop your own level of expertise.

    So, for example, when I started my business, I was very strong in being able to help clients identify the technical aspects of how to improve their business, and help them implement and achieve great results. However, I had very little practical experience in Sales and Marketing. That didn’t come naturally to me. I needed to work on my own business in that respect so I engaged someone who was an expert in that area to coach and mentor me. Sure, I could have just employed someone or outsourced that function, but I really like to understand something before I ask someone else to do it for me. Maybe it’s the perfectionist in me.

    These days, I do have someone on my team, Daniel, who is an expert in that area and handles most of that part of the business for me…and also enables us to provide some level of sales/marketing coaching and mentoring for our clients if that is their bottleneck.

Accountability

Now, as well as a Coach asking the right questions, a coach can also help keep you accountable!

I’ve seen it time and time again…clients who are very rigid and disciplined in meeting deadlines for their customers’ jobs, but don’t treat their own business with that level of priority and discipline.  It’s natural and common though, and it’s because we know we’re accountable to our customers. We don’t want to let them down. Yet, we’re more flexible when it comes to holding ourselves accountable within our own business, where only we know if an expected timing has slipped. When we make a commitment to an external party, for example a Coach, then we don’t want to let them down and we put pressure on ourselves to honour that commitment. In other words, we hold ourselves accountable to the Coach!  (Business is so much more about personal and team psychology than I ever understood as a young engineer!)

If you want accelerated success in your business, the long and short of this article is to recommend that you get a great mentor who is also a great coach. The mentor must have the appropriate expertise to help you advance in whichever area/discipline you desire.  I’ve invested in several different mentors over the years, in different disciplines…and my philosophy is to invest in quality.

You’ll know when you’ve found a mentor who’s right for you because things will just ‘click’. They’ll ‘speak your language’, trust will build quickly and you’ll see rapid results. If at first you don’t find one that’s right for you, then try a different one.  Always seek one with a proven track record of client results, and someone who doesn’t just ‘tell you’ what to do, but explains their recommendations clearly and simply and can demonstrate why and how those recommendations will work.  Seeing is believing! 

Contact us to discuss our coaching and mentoring options by clicking here.

Want to leverage business improvement across multiple sites?

Want to leverage business improvement across multiple sites?

By Dennis Keay Businesses that operate from multiple sites often overlook great improvement opportunities. That’s true whether they’re a private business with a profit motive, or a government institution. It’s true of manufacturers, hospitals, local and state government departments, and service-based companies.  I know, I’ve observed it first-hand while doing work for each of these sectors. It’s even true between departments in large multi-department organisations operating from a single site. In my experience, the main cause, to put it bluntly, is ignorance!  Sounds harsh, but it’s not meant to be. It’s just a matter of ‘we don’t know what we don’t know’ and ‘out of sight, out of mind’. If we don’t know we’re missing out on something, then obviously we won’t be looking for it.
We only do what we know, and so to do better we need to know better!
It manifests itself in various ways, including one or more of the following:
  1. The lack of a well-structured and well-coordinated cross-site (or cross-department) approach to improvement;
  2. Relatively poor cross-site (or cross-department) communication / knowledge sharing;and/or
  3. An approach that doesn’t adequately encourage input from the various sites or departments, and doesn’t leverage the knowledge and experience available from those sites/departments.
There are usually hidden ‘structural’ barriers to contend with as well, that relate to human behaviour and the reward systems that drive it. You’ve probably heard the phrase ‘What gets measured gets done’. You could equally say ‘What gets rewarded gets done’. Here are some examples:
  • ‘Firefighters’ in business often get hero status when they make quick decisions and save the day. They get rewarded with promotions. You could argue that the un-sung hero, who prevents fires in the first place is more valuable and should get promoted, though may simply go unnoticed. So, the organisation develops a culture of reaction rather than prevention;
  • Inappropriate or conflicting metrics drive conflict and waste. If your Salesperson receives a commission-based salary proportional to the amount of product sold, then he will try to sell as much as possible. But if this is greater than your production capacity then the Production Manager will be under pressure to produce more…whether or not that is in her control. If she has little or no responsibility for Quality (because, in this particular business that’s the Quality Manager’s responsibility), then she may be reluctant to slow production down in order to improve quality. There’s a knock-on effect, potentially including increased warranty costs, customer dissatisfaction, and damage to reputation of the business.Similarly, if different business sites are encouraged to compete with each other to see which site performs best, and that site is praised and rewarded for its performance, why then would they feel inclined to share their ‘secrets’ with others in their network?  That lack of sharing is an opportunity lost and an opportunity cost for the business as a whole.

Some Remedies

So far, I haven’t told you how to remedy the situation. I could tell you about the tools and:-
  • How we’ve helped large multi-state, multi-site manufacturers effectively deploy improvements gained at one site across the business;
  • How we’ve helped improve inter-departmental communication and cooperation through value-stream mapping activities to create some fantastic wins within one department which has been shared and implemented in other departments to create similar wins.
All true! But…the secret is NOT to focus on the tools. You’ve got to focus on the people and what motivates them and encourage true teamwork. It’s a psychological game! Focus on the culture you want to develop within your business and the behaviours that you want your people to exhibit, then make sure you encourage and reward those behaviours. Getting the metrics right is one of the fundamental steps, and one of the more difficult steps. One element of this is to make senior leadership’s rewards based on overall business performance, not just meeting their department’s targets. For example, the Production Manager’s reward (or lack thereof) can be partly dependent on Quality performance and preventive Maintenance effectiveness. As I said, what gets measured gets done, and we only do what we know, and so to do better we need to know better!  That means we have to keep learning. If you’d like to learn more about our experience in this area, and how we might be able to share some of that with you to improve your business, just reach out and contact us, we’re more than happy to oblige.