Tag: Operations

I’ve started and operated several companies, all of which used independent contractors (and some of which also used traditional employees). Some key business tactics I believe in include: relying on empirical data to make decisions (whether or not that means using rigorous programming based data analysis techniques); preferring slow incremental growth via low risk bets (versus making high risk decisions that could lead to disaster); keeping cash reserves to protect against disaster; and that trust is critical to successful relationships with colleagues, workers, and clients.

Those practices can be implemented in any company, whether you use independent contractors or traditional employees. But over the years, I’ve compiled a list of operating practices I would adopt if I started a “normal” business with “normal” employees. If you are starting a business with employees, maybe you’ll find you, too, want to adopt some of these practices.

Here’s an overview of 15 business practices to adopt as you start your small business. I could probably write a full post about each of these practices (and for some of these, I already have), so I’ve tried (with limited success ) to keep each section brief:

Whenever possible, reduce the number of choices to customers.

Barry Schwartz’s 2004 book The Paradox of Choice: Why Less is More. We’ve all been conditioned to believe that the more options the better. This book’s counter-intuitive premise is that adding options reduces the likelihood that people will select any, whether the decision in question is trivial (which gourmet jam to purchase) or very significant (which health insurance plan to sign-up for). And when most people stop to think about it, they can think of personal examples when more options led to indecision. For me, this often happens at coffee shops — when I see too many different breakfast sandwiches and scones to choose from, I order only coffee. In contrast, I love shopping at Costco and only having a few brands of yogurt to choose from!

Don’t be afraid to turn down customers or clients, or to refer them to your competitors.

It is scary to turn away business. But there are two theories behind my tip. The first is opportunity cost — if you accept “bad” business, you may be losing some “good” business because your time and resources will be tied up with the “bad” client / customer. Bad can be defined in any way you choose — customers who try to negotiate price, customers who threaten to take their business elsewhere, customers who need lots of extra time and attention, etc. The second theory behind this idea is that if you aren’t the best fit for the client (whether that’s because of price, or skills, or other reasons), then referring them to someone who does fit their stated needs helps you to build trust. And when they trust you, they’ll be more likely to recommend you to people who are a good fit for your company. As an added bonus, sometimes, when the issue is price, the clients may learn that you get what you pay for and end up coming back to you. Take a look at The Trusted Advisor by David Maister, Charles Green and Robert Galford and Trust Based Selling: Using Customer Focus and Collaboration to Build Long-Term Relationships by Charles Green to learn more about these ideas.

Create ‘Good jobs.’

MIT professor Zeynop Ton, in her book The Good Jobs Strategy, defines good jobs as fulfilling jobs that pay well. Companies like Southwest Airlines, Trader Joes, Costco, UPS, In-N-Out Burger, use human-centered operational excellence to offer low prices to customers while ensuring good jobs for their employees and exceptional returns for their investors. Ok, that’s a lot of buzzwords. Put another way, make four operational choices — Offer Less, Standardize and Empower, Cross-Train, and Operate with Slack — and you will find that (contrary to popular belief) you can run a successful business and pay your employees a living wage or more. Read this post I wrote in 2016 to learn more.

Subsidize family care.

When people know that their loved ones (young children, elderly parents, and other dependent family members) are being cared for, they can focus on their work at work. I believe in universal high-quality childcare for all, but that’s a post for another time.

Paid family leave.

This is corollary to subsidizing family care and I could write an entire post about the importance of paid family leave. The short version is simply that allowing people to take care of their loved ones: 1) allows them to be more focused at work; and 2) secures loyalty from your employees.

Hire for soft skills.

I’ve always done this when hiring independent contractors, and it carries over to employees as well. It’s better to hire someone eager to learn who works well with people, than someone who has already perfected the skills but lacks emotional intelligence or communication skills. Mastery of content is important, but that loses value if you can’t communicate your thoughts or collaborate with others. Read more about my thoughts on this topic here.

Invest in your people.

Turnover is costly. Provided you’ve invested in creating a relationship of trust with your employees, it is cheaper to train and develop your existing employees, than it is to find, recruit, and onboard new ones. Cultivate your employees.

Encourage vacations.

Listen to @ProjectTimeOff’s Katie Denis’s advice. Unplug when you’re on vacation and your company will be better for it.

Trust your people and they will develop new skills & talents in your absence. And your business will grow and thrive.#productivityhttps://t.co/Jucc6Oh6rS

— Yolanda Lau (@yolandafan) December 28, 2018

When people go on vacation, and truly step away from the office, they come back to work happier, more creative, and more productive. More vacation days has been shown to decrease the number of sick days taken off! And when you, or other executives go on vacation, ignore emails unless it’s truly an emergency that only you can fix. Doing so shows your people that you trust them (if you can’t tell, I’m a big believer in trust) and gives people the chance to develop new skills and talents in your absence. And it helps reinforce the company culture that vacations are encouraged.

Additional paid leave between Christmas Eve and New Year’s Day.

Obviously this isn’t possible for all companies (retail shops, for example), but if at all possible I’d reduce operations during this period. Forcing people to take time off means your employees come back to work rejuvenated. For employees with young children, they often have to take time off anyway and this can be a huge stress reliever. Plus, no one really wants to work during this time anyway (employees and clients) and you save your employees from fighting over who gets to take leave during this time. Lastly, think of it as part of your benefits package, that allows you to hire and retain the best employees. Not convinced, take a look at this post from Inc. (not written by me).

30 hour weeks at full time pay.

The eight-hour workday is a relic of the industrial era; Henry Ford pioneered the five day work week (down from six days), and that’s how we ended up with the 40-hour work week. Most of us can agree that we’ve moved beyond industrialism. Isn’t it time we move on from business practices created for that era? I believe that if you trust people to squeeze all their productivity into 30 hours, instead of 40+, and you’ll have more engaged, happier employees. That sounds too drastic for you? Here are some alternatives: 35-hour work week; a four-day, 10-hours per day schedule; create core hours (say 9:30am to 1:30pm) where employees are required to be working (then trust that they will work from home in the mornings or evenings to work the required number of hours).

Encourage people to be their full selves at work.

Need to take long lunch to recharge? Leaving early to coach your daughter’s baseball team? Coming in late after your son’s school play? Taking your mom to her doctors appointment mid-morning? People are more productive (and loyal) when they don’t need to hide a part of themselves during work hours.

Trust your people with the big picture.

Share your vision, make it a shared vision, and employees will dedicate themselves to your vision. Work becomes more meaningful. Feeling inspired, people are more likely to go above and beyond to help each other and your customers. And when you share the big picture, every employee feels empowered to contribute ideas. Innovation happens more quickly.

Don’t grow for the sake of growth.

Small Giants: Companies that Choose to be Great Instead of Big by Bo Burlingham is one of my favorite books. It highlights businesses that chose to stay small and true to themselves, instead of growing for the sake of growth. Another book in this vein is Built to Last: Successful Habits of Visionary Companies by Jim Collins and Jerry I. Porras. Built to Last has a slightly different message, but the common ground between it and Small Giants is the idea of building a meaningful, enduring business.

Diversity and inclusion strategy.

D&I is a hot topic these days, and for good reason. The business case for a D&I strategy is clear — increasing diversity leads to tangible economic gains. McKinsey’s Women in the Workplace 2018 study is just one of many studies that have made a clear business case for diversity. There are many resources out there for companies who choose to tackle this issue (and I hope that most will), so I won’t write too much about this here. What I will say though, is that we should (perhaps unintuitively) focus on inclusion (how people are treated) before diversity (the demographics / numbers). Start with inclusion and company culture — what things are said and unsaid, who speaks at meetings, who gets chosen for presentations and projects, etc — and work on overcoming biases. Then, work on diversity.

Commit to pay transparency.

Employees are happier and more motivated when salaries are transparent. They work harder, they’re more productive, and they’re better at collaborating with colleagues. All this leads to greater profit for the employer. But researchers say transparency is also important because keeping salaries secret reinforces discrimination. So back to D&I — committing to pay transparency will help close the pay gap, and increase diversity, all while helping your bottom line.

Whew, you made it through all 15 business practices! 
These practices may seem extravagant, but they’re practices that have worked for successful companies. They might not all be appropriate for yours. But I believe in treating employees with decency and respect, and giving them meaningful work while allowing them to also have lives outside of work. And I believe that doing so will ultimately improve your financial performance.

What are your best practices for operating businesses? Please share them!