UNDERSTANDING THE FOUR FUNDAMENTAL DISCIPLINES OF YOUR COMPANY’S SYSTEM

I can ask the following questions of any business leader to discover where his or her business either is, or soon will be, suffering. You will see that the questions don’t relate to the business itself, but about the leader’s knowledge of the system he or she is leading.

Test yourself with the following questions and identify whether each is “True” or “False” as it relates to your management.  At the end of the test, consider one more question, “Where would my business naturally be held back based on how I answered these questions?”

FINANCIAL
1. I manage my company by the numbers each month using a:

• Profit/loss statement
• Balance sheet
• Cash flow statement
• Annual and monthly budget

• Setting prices
• Employee compensation and bonuses
• Investments
• Expansion

• Return on Investment
• Return on Capital Employed
• Days Sales Outstanding
• Days Payables Outstanding
• Debt to Equity
• Days of Inventory Outstanding
• Current & Quick Ratios
• Overhead Expense percent to Net Sales
  

• Revenue
• Labor
• Materials
• Gross Margins
• Net Margins

• I assume personal responsibility for my company’s marketing decisions and results.
• I have a marketing budget that I actively use to ensure I hit my targeted sales numbers.
• I personally monitor the results of my marketing activities, or I have the results reported to me each month.
• Each month/quarter, I compare my results to previous months/quarters for relative effectiveness.
• I never invest in any marketing activity unless I can measure its ROI.
• I have a marketing calendar of events planned out each year in advance that ties with my marketing budget and my sales growth plans.
  
  SALES
  
• My salespeople’s compensation is tied to their sales success or by satisfying predetermined objectives.
• My salespeople fill out weekly activity reports that are consolidated onto a tracking tool that identifies trends.
• My salespeople are regularly trained based on what I see in their activity reports and I see the results of their training each quarter/year.
• I have regular sales meetings with an agenda that addresses my salespeople’s activity, and the company’s needs.
• I recognize my salespeople for their contribution in new and creative ways.
• I have a policy of quickly replacing salespeople when their sales are sub par and there is an inadequate response to training

• My production managers fill out daily or weekly activity reports that are consolidated onto a tracking tool that identifies trends.
• I monitor my production numbers and percentages each month for labor, material, and other key expenses in order to immediately correct unfavorable trends.
• I train my production people to look for operating inefficiencies and reward them when they find and implement improvements.
• My production staff are regularly trained based on what I see in their activity reports and I see the results of their training each quarter/year.
• My production people constantly look for better ways to satisfy the needs of our customers and the company.
• My production people receive a bonus that is tied to their production or by satisfying predetermined objectives.
• Regular production meetings take place with an agenda that addresses my production people’s activity and the company’s needs.
• I have a policy of quickly replacing production people when their work is sub par and there is an inadequate response to training