Many times as a business owners, some problems come up within our businesses, and we think we know the answer to the problem. We then implement a solution to find that the problem is not resolved and is reoccurring. Often this is an issue of being too close to the business or because we were not given the correct information.
Has a similar situation in your business occurred to the one below over multiple departments within your organization?
Situation
A new salesperson on your staff sells one of your products to a new client. As time goes by, the client starts calling over and over into customer support, and it does not appear the issue is getting resolved by your staff, and your support staff is receiving an unfavourable review. The salesperson is rewarded by getting their commission and has moved to the next customer sale.
You ask your sales rep to see the client. They meet with the client and confirm that the issue is in the support area, and you begin to work on how to address their problem. It seems the support team has not performed their job, so you make changes to ensure this does not happen again in support.
Despite the changes, it appears that more and more incidents are occurring. This situation is now happening with a couple of clients on multiple products, so you decide to pick up the phone and call the clients.
You then uncover that the symptom of the issue appeared to be in customer support, but with further investigation, the customers do not feel the product is performing as they were sold.
The problem is one of sales. The salesperson oversold the product; no matter what changes you made in support, it would never resolve the issue.
The Question
There is a bit of a process to follow in resolving problems, especially ones across several departments. So the question becomes, how do we determine where the problem lies? Is it a problem, and what is the best way to resolve it?
What is a Problem?
Problem: A problem is a measurable gap or deviation between an observed state and the expected state, norm, standard, or status quo.
In this business example, we can use a business owner reviewing his financial statements.
Example:
The business owner sees his gross margin (Sales – Cost of Sales) as 50%. Is this a problem?
The answer: It depends. Some questions need to be answered first.
What did the business owner expect?
What were the margins before? In other words, what is normal?
Utilizing comparison, what are the margins in the industry?
What should have been the margins?
These are quite different questions, each of which can result in a different solution. In the table below, determine if you believe there is a problem for each scenario.
There is a fair amount of difference in each scenario. First of all, it depends on your industry; each industry tends to have its own structure.
Scenario 1 could be a software company.
These companies tend to have a meagre cost of sales but higher fixed costs.
Scenario 2 could be a services company.
There is labour, not physical goods are being offered.
Scenario 3 could be a manufacturing company.
This business is where raw materials are transformed into finished goods.
Answers to these questions will start determining where the real problem lies.
For example, in scenario 3, expectations and what the margins should have been are in alignment. Compared to the industry, the owner expects improvements from previous typical results. It would have appeared that plans for the expected margins should have been met (60%); however, actually, observed margins are lower.
Are discounts being offered that dropped revenues?
Are there surprise expenses?
Have some costs increased or unplanned?
Many questions; few answers at this time. It appears there needs to be onion peeling going on.
In the other scenarios, where there will likely be multiple products, pricing issues, costs of sales, product mix, sales expenses, and even transaction posting errors can be suspect. A common source of frustration with owners is that expected programs or products were not released on time, ran into quality issues with products, were late to the market, or there was unexpected competition, to name a few.
Perhaps the most challenging answer is "What should have been?". You need to gather objective evidence that supports observations, not evidence that supports a theory we might believe or a conclusion (hypothesis) that we might jump to early in the process. This often implies gathering the facts without bias or personal influence from anyone involved.
In order to set in motion a problem-solving exercise, the problem needs to be clearly articulated. Problems are about the relationship between variables; the fact that the margins are 50% is not a problem in of itself; the fact that the margins 'should have been,' or were 'expected to be' 60% is problematic. The problem statement needs to focus on a particular issue, address the relationship between variables, and contain the foundations of its solution, namely, what should have been.
In scenario 2 above; the fact that:
Margins were 50%.
Margins were expected to be 55%.
Margins should have been 40% representing multiple problems.
These problems deal with the variables of:
What is versus what was expected?
What is versus what should be?
What was expected versus what should be?
Each of these will derive its unique solution, and there may be no one solution to address the 50% observation without relating it to owner expectations (realistic?), execution dynamics, or product performance influenced by market dynamics.
Whenever you are surprised by an observed result, sit down and ask yourself these four basic questions:
What did I expect?
How / What were we doing before? In other words, what was expected?
How are others in our situation doing?
What should have been?
In our opening scenario, what would be essential to understand?
What were the customer expectations?
Was this situation normal or abnormal in your organization?
When the problem arose, did you find that other customers were having similar issues with the same product in the customer support area?
Once other customers start experiencing similar matters in support but with differing products, you start trying to eliminate and determine where are the shared variables.
Upon investigation, you discover that the customers with the issues were all sold products by the same salesperson.
You sit down with the salesperson to find out how they are setting expectations with the clients, as it appears they are selling features that are not currently in the products and will not be for some time.
As part of the discussion, you uncovered that the salesperson was not up to speed on what was currently in the product. There were planned selling features, and he had not received the proper training and information from his manager.
It is sometimes difficult to get to the root cause of a problem, especially since issues may have symptoms seen across various departments. What may have initially been seen as a support problem and then traced to the salesperson actually turns out to be a training issue in the sales department.
If you find that you find yourself in situations where problems are occurring, but you are not always able to determine the root cause, this is where we find we can help business owners truly. If you need help determining where the problems are in your business and how to resolve them, this can be done through business coaching.