10 ways to test your business
CONSTANTLY testing your business is not being paranoid. It's essential. Here are 10 strategies to really get to know how healthy your business is, beyond the balance sheet.
1. Continually test, test, test your products and services
Bruce Keebaugh, founder of catering group The Big Group is flat-chat with expansion plans for his 21-year-old Melbourne catering business.
The company is juggling a new catering contract for ANZ's Docklands headquarters, is completing work on two new venues including a city ballroom as well as The Big Group's latest foray into retailing, the Capital Kitchen. Opening in December 2009, the Capital Kitchen is a big, bold café/store in the new $250 million luxury wing in Melbourne's Chadstone Shopping Centre.
"You need to be testing all the time, ironing things out," says Keebaugh, who thinks about his business as a "live site", never static.
Keebaugh likes to put every aspect of his business under scrutiny every day. When he arrives at the Capital Kitchen, Keebaugh immediately starts inspecting the food displays, how it all looks, from the dusting on the doughnuts to the stacking of water glasses, he checks the bathrooms and also sizes up staff, their grooming and their energy.
"They are touch points for the business," he says. "Someone always needs another drink or their coat put away. Everything is never fine. There is always something that needs doing."
Just as a person needs to check their blood pressure, cholesterol and other essential functions, a business needs to have its vital signs continually checked.
Mark Richardson, author of How Fit is Your Business? A Complete Checkup and Prescription For Better Business Health workshops around the United States working with businesses through a 10-point check up system to measure the "fitness" of businesses.
Richardson finds that people respond well to the health analogy.
"If they can understand testing in a language they are familiar with (around health check-ups) then lightbulbs go off," he says.
Richardson's check-ups look at areas including key metrics ("knowing your numbers," he says), reputation and teamwork. From his experience testing thousands of businesses, leadership, culture and/or product are what makes a business unique.
2. Know your vital signs – they are unique to each business
Sean Spence, director of consultancy Sean Spence & Associates, says it is crucial to understand the core currencies of your business.
"There is no value in a retailer thinking that the most important measure of a store is how many people come through the door, if they are coming in to check out the item, go home and buy it on eBay."
Each business must identify its own vital signs. Metrics such as IP, reputation, engagement, even the way staff communicate in meetings can be a critical measures of business health.
3. Make sure everyone knows what's being constantly tested
At leading beauty spa, Aurora Spa Retreat, testing is constant says Aurora's general manager Jason Cook.
"We need to test ourselves all the time, you can go off track relatively quickly," he says.
All staff is measured on a range of indicators, from revenue targets and personal performance through to team morale. Staff get to score their manager out of 10 each month too. The results are shared month-by-month. The monthly reports also include Aurora's general manager Jason Cook's inspection of every treatment room, relaxation area and bathroom in the spa.
For the last 18 months, a senior team from the spa, including Cook and Aurora founder Lyndall Mitchell have been working away from the spa itself, in office space in a nearby suburb. Being offsite means that many of the management team do not have the luxury of always being on the premises to watch over spa proceedings. Cook sees this as a positive, rather than a negative.
"The key is to have really competent staff and the right systems to back that up," he says. These systems allow senior Aurora staff to look at business growth rather than micro-manage the day-to–day running of the spa. The spa performs 15,000 treatments per month and has 100,000 clients on its database. There are plans to launch a second Aurora spa in Melbourne, offshore spas in Asia and the UK and the company is launching a new product range in retailers Myer and Mecca Cosmetica.
4. Add a bit of mystery
Aurora Spa staff is well aware that mystery shoppers regularly come for treatments. Staff with glowing reports receives a $50 bonus. If a staffer receives three bad reports they move onto a warning system.
"Three strikes and you are out," says Cook.
On pretty much every SME mission statement, it is likely to say something about being a high performing organisation. Griffiths says that this "high-performance" company stuff often crumbles when put to the test because companies keep leaving poor performers in their businesses.
"The biggest risk is having an underperforming resource and allowing that resource to remain in place when you are trying to build a high-performance culture," he says.
The new Fair Work Act introduced in July 2009 has made employers nervous about dismissing staff. According to compliance expert Andrew Griffiths, a founding director of CompliSpace: "Some managers are simply saying it is to hard to get rid of that underperforming resource," says Griffiths. "It creates a rot in the company culture."
5. Testing is a hands-on process. Don't palm it all off to others.
There is no substitute for seeing something for yourself.
Director of The Mint Group, Tony Frische was at the Crown Palladium ballroom in Melbourne on February 15 for the 2010 Alan Border Medal. He was there checking that the team of staff supplied by the Mint Group to Crown was up to scratch.
These on-the-spot visits are common for Frische, whose business provides "job ready" staff to clients such as PBL. Saturday nights are often spent popping into a few venues where Mint Group staff are working, checking for punctuality, customer service skills and making sure staff are clear on what they are meant to be doing.
If catering staff is hired to serve 1,000 meals in 20 minutes as they do for the AFL Brownlow Medal function, then Fritsche wants to make sure it's all clear before the food is plated up. Technically, Frische could leave this up to the client but he likes to check that he is delivering the service his clients are paying for, nothing less.
The Mint Group's is an accredited training company. It has just won the contract to train up to 3,000 staff from the Hyatt and IHG Hotel groups. All these programs must be accredited.
"Every single state will test us and audit us," says Frische. "Without this accreditation our business won't exist, so we have to keep testing to make sure we have got it right. This is how we eliminate quality, technical and perception issues," he says.
There are also internal audits, staff surveys and performance reviews; information from customer feedback and client surveys to keep Fritsche aware of the business' vital signs.
6. Get addicted to feedback
Fashion stores Witchery and Mimco are constantly being tested, under the watchful eye of chef executive Iain Nairn, who has decades of retail and management experience behind him.
He has worked in companies that use the business management system Six Sigma, as well as for firms that take a more organic, freeform approach to assessing the health of a business.
Now he gets to test the business his way.
Feedback from every store is collected weekly; customer's views on products, quality, fit and style are constantly sought, through the stores, through online surveys and through focus groups.
The company performs what Nairn calls "brand health checks" that are a combination of focus groups, exit surveys (from customers after they have left the stores) and online research.
Witchery customers seem to love all this surveying, with a whopping 10% of its database responding to a 70-question survey.
"We want to know how the customers are thinking," says Nairn. Nairn and his executive team also do weekly runs to major shopping centres to keep an eye on the competition, especially as new season merchandise "drops" into stores.
7. Apply stress tests
To take things to extremes, Rai Chowdhary, author of the Ten Mistakes of Risk Management likes to apply a series of worst-case tests to businesses.
- Assume all existing customers switch, starting tomorrow. What strategies will be used to manage the business going forward?
- How will the business meet its obligations if the bank/mortgage company changes the rules of them, asking that all debt be repaid in five years or less?
8. Keep returning to the coalface of the business
Bruce Keebaugh's high-end customers who hire the Big Group for often hedonistic events (St Tropez at Portsea anyone?) have "no hesitation in giving us a red hot tip about anything", so Keebaugh is used to hearing many of the complaints first hand.
"And those conversations are so important," he says. "Many other businesses aren't so effective at capturing complaints, let alone dealing with them."
CompliSpace's Griffiths companies can brag about low negative feedback when the reality is, disgruntled customers find it too difficult to actually deliver their complaints. Get testing.
9. Align testing with you objectives
CompliSpace tests SME businesses, making sure companies' staff and systems are keeping up with regulatory changes, know their corporate governance and know how to manage risk.
According to Griffiths, SMEs are failing to test staff enough on critical compliance areas such as whether staff are clear on the company's objectives.
"They absolutely don't do enough," he says. This is extremely risky as it suggests that staff may not be doing what they are meant to be doing. This disconnect between company objectives and the way staff see their roles in the business can be disastrous.
If staff don't understand the objectives, "how can they understand where the business wants to go?" he says.
10. Don't be tempted to focus on business strengths and push aside the weaknesses
During Richardson's workshops where companies assess their "business health", he comes across a common but baffling reaction to bad scores in key areas.
When a company scores badly in a crucial area, it doesn't always ring alarm bells.
"I do find it fascinating that if you had a child at school and they came back with two As, a B and a D, you would focus on improving the D," says Richardson.
"In business people will tend to focus on the A to make it an A-plus." Richardson says this happens because often a business is created because an entrepreneur is passionate about something (a product or a service), not necessarily about running a business.
"People forget about their weaknesses," says director of recruiting firm The Mint Group www.mintgroup.com.au Tony Fritsche. "If the market is saying there are weaknesses, you have to listen to that and if you don't fix it, you don't have a business."
Denver-based Fortune 500 business consultant James Roncevich likens this approach to the kind of negligence as "singing 'Kum Bay Yah' and holding hands while walking toward and over a cliff led by the leadership team."
Emily Ross is a Melbourne-based writer and consultant.
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