Sometimes you’ll need to set a few progressive targets, to get a client from a ‘poor’ position, to a ‘best practice’ standard. Here is an example.
Suppose you have a client who is a real ‘basket case’ of a business: too much stock; debtors don’t pay on time; the company doesn’t charge enough for their product so gross profit is low and overheads are too high. To base all the targets on what the most profitable businesses are doing – will reinforce how poorly this business is doing. Further demotivating and frustrating the client – they might just give up altogether. To help this business, break down the improvements into manageable chunks: just look at one part of the business first, or set a reduced, achievable target initially.
You might decide that since the business is in a smaller town, and the client hasn’t yet achieved that average, therefore this will be a good first target to aim for. So, the first set of variances come from comparing the client to the ‘rural company’ averages.
Emphasis is put on the word “first”, because hopefully you’ll get them up to that stage reasonably quickly. If a business is so far behind the averages, then changes in two or three areas should quickly start to turn the financials around. “Why is your stock level so high?” “Because of the way we like to order in full box lots; because I can never say no when the rep’s here” or the other factors that will come out of the discussion. Having taken some quick and decisive action, you and the client can then move to achieve ever ‘tougher’ targets in the future months. So, a first objective might be to reduce stockturns by ‘1’ (or reduce the value of stock by a specific dollar value such as $10,000). This proves that it is possible, and that the sky won’t fall in if it’s done properly. Then a newer, tougher target can be set for the following six months. And so on until you reach the target of the best companies.
Specific, measurable, achievable, realistic and timely goals are key.
Start with a ‘gimme’ goal to increase motivation and gradually raise the bar from there.
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