How to Effectively Run a Company

Originally titled 'Where to Begin'

Answering fundamental questions can help you figure out how effectively your company is running.

Let’s say you just achieved your lifelong ambition and now either own or are running a small or mid-size manufacturing company. It is likely you already know something about the company, but now you have overriding responsibility for current performance and future growth. Where to begin? The answers to this question are probably as varied as business itself, but it is always a good idea to start with the basics, and the following questions can help re-acquaint you with some of those basics within your company.

1. Who are your customers, and what are their expectations? You cannot go wrong starting with customers. After all, they are your company’s lifeblood. Without them, you do not have a business (at least, not for very long). You need to know as much about your customers as possible. Are they concentrated in just a few areas, either geographically or industry-wise, or are they widely varied? How are your sales distributed? Do just a few customers account for a large portion of those sales, or does no single customer represent more than a small percentage? Have your customers been with your company for a long time, or do you have a high turnover in those you service each year? 

What are your customers’ expectations? What drives them? Is it all about price, or do they value the other services you can offer? How do your customers feel about your company? (See my June 2017 column, “Do Your Customers Promote You?,” at short.mmsonline.com/customers.) Is there anything that “bugs” them about what you do or how you do it? What was the last legitimate complaint you received from a customer, and did you handle it to that customer’s satisfaction? What would cause you to gain, or lose, business from your customers? 

There are really no best answers to any of these customer-related questions, but it is important to ask them nonetheless, because the more you know (or discover you do not know), the better equipped you are to meet customer expectations. 

2. Is your company a safe place in which to work? What is your track record on lost-time accidents? Do you train employees on safe working practices and then practice what you preach? Do you track “near misses,” and communicate both safety incidents and these near misses to all employees? Are safety audits done on a regular basis? Does a safety team exist to conduct these safety audits and take appropriate action when unsafe conditions are uncovered? Do all employees feel safe in their work areas?

3. How do you know how you are doing as a company? This comes down to basic company metrics. What do you measure, and how do you perform against these measures? Here, you must be willing to be critical and ask the tough questions. Do you focus strictly on dollars, giving attention only to booking (incoming dollars) and shipment (outgoing dollars) metrics? Do you measure your commitments to customers in terms of on-time delivery? If so, how do you calculate on-time delivery—using your promise or your customer’s request? Promise date may be good enough, as it measures what you said you would do, but it may be affecting business with customers who believe commitment means meeting their delivery needs. Lastly, are you measuring your standard lead times against competitors’ and customer requirements, and evaluating whether you are improving?

4. What is the quality of your products? Once again, metrics are needed to tell the story. Is your quality management system effective? Do defective products “escape” to your customers? Does your internal inspection process capture many nonconformances? Affirmative answers to these last two questions are symptoms of a poor quality management system that requires immediate attention.

Are corrective actions taken seriously, or are they just paper-shuffling exercises? Does corrective action lead to preventive action that is both effective and timely? Is everyone confident that whatever information they pass along to their internal customers is right?

5. Are your employees happy? It can be said that a happy employee is a more motivated employee, and today’s manufacturing companies need motivated employees if they are to excel. Is employee turnover abnormally high (more than 15 percent)? What are the main reasons employees leave the company (or don’t you know)? Do you offer opportunities for promotion? Do you offer employees opportunities to learn and apply new skills? As a company, do you really value training and education for your employees? If so, how have you demonstrated this in the past?

As basic as some of these questions may seem, they are worth exploring in order for you to gain an understanding of just how effectively your company is running.