By Rai Chowdhary
Here are five of many lessons I learned from my dad as we drove around in his 1951 Chevy – visiting customers and suppliers in Bombay (now Mumbai), India. They have helped me survive economic earthquakes and tsunamis over the decades. I am sharing the same, and trust you will find them useful too.
1 – Treat your employees and contractors like family
Many business leaders will say your employees are your biggest asset; yet when business conditions go south, will not hesitate to lay them off.
When you treat employees as “part” of your family – you invest time and coach those who lag behind to help them develop. Guide them and show tough love if and when they misbehave, and lift them up when they are down.
Those employees that are more experienced can become your advisors, if you are humble and teachable. Lessons you can learn from them will save you and your company from the many storms that will rock your boat.
Then there are ones who are kind and nurturing; they will mentor others and “prevent” them from punching holes in the boat.
Rarely, but it will happen that you get a few bad apples. Find the reasons for such deviant behavior, give them a chance to self correct and get help from others in the group. If they will not mend their ways they will be eased out by the rest of the team as it stands united.
2 – Value your suppliers like your partners
Partners are treated as equals, with respect, and as confidants. You can lean on partners during good times and bad. So it is with suppliers.
They will lend a hand when the business faces rough weather and finances are tight. The supply chain will still remain in tact enabling you to tide over the difficult times.
Don’t penny pinch or drive your suppliers to reduce prices unreasonably. Take them into confidence, share with them the challenges you face and leverage their knowledge to overcome challenges, and reduce costs. Coach them if they don’t know how.
Measure their performance and reward them based on performance; but remember – metrics can have a corrupting effect. So use them carefully.
Let them guide you – where feasible – in the design / delivery of your product / service. This will deepen the engagement and create a win win for long time to come.
3 – Reduce the lot / batch size, improve first pass yield, and “prevent” defects early
Since the time of industrial revolution – goods have been produced in larger quantities. While mass manufacturing reduces cost, it can also lead to colossal waste – particularly when batch sizes are large. Smaller batch sizes enable tighter and quicker control. Defects / errors do happen; trap them quickly and as early in the process as possible.
At his factory, he instilled in his staff the importance of checking their own work before it was passed on to the next step. Any defects found were to be investigated right away and the causes fixed before any operations could resume. There were “no” final quality inspectors who acted as a police force; everyone was empowered to build quality into the product, and visual samples of what good looks like vs. what was not acceptable were available at every step in the process.
He also taught me the importance of “first pass yield” and particularly why it needs to be the highest in the steps that are (a) the most expensive, and (b) closer to the end of the line.
4 – Listen to your customer and minimize turnover
Every time I went with him on customer visits, it was a sheer delight to see how we both were welcomed by his customers. This was vastly different from what I saw happening with other suppliers.
On the way back during one such visit, I asked him why this was so. Trust, and relationships – they are two corner stones he said. Without that it is impossible to build a business. Establishing trust takes time, and a lot of active listening and responding in a helpful manner. So one has to keep working at it. Relationships get stronger with time when nurtured, and like an oak tree they can withstand high winds without getting uprooted.
Unlike many of my competitors who keep flipping one customer for another, I prefer keeping customers for life. In the long run, the deep roots matter, and you operate with a lower total cost of business. Getting new customer is not only expensive, but it is hard to tend to too many saplings – so many do not work out and even the promising ones get short changed in the process.
5 – Know your dry well time and the “cash to cash” cycle time
What blood flow is to life, cash flow is to business. Why this fact is lost to many is a puzzle to me. Time and again we have seen businesses folding up because of inadequate cash. Dry well time is simply the duration for which a business can keep doors open at a certain burn rate before the cash balance dries out completely. But this metric by itself is not enough.
One must also know the typical time it takes to go from cash to cash. Let me explain.
It takes cash to prospect, and win customers. This metric looks at the time elapsed from customer contact to receiving a purchase order, and finally to getting paid for the product or service. Few organizations measure this. Those that manage it are rarer. Business leaders should never lose sight of these two metrics.
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Thanks so much dad for your foresight in teaching me important lessons early in life. Although we lost you in 1967, the memories you left behind are alive and revered. I am now passing these lessons on so others can benefit too.
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