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Succeed by Inverting Your Business

InvertedPyramid

Several years ago, Vicki and I attended a function near the Ronald Reagan Ranch in California. One of the activities was the opportunity to ride in a Glider Plane with a professional pilot. I was quick to sign up. What an outstanding way to see the Santa Barbara area of California!  


The pilot gave instructions, connected to the tow airplane and we were off. Everything was perfect and then, the pilot made it even better. He asked if I would like to take the controls. “YES SIR!” I replied. I have logged nearly 2200 hours in a variety of aircraft, but, never a glider plane. What an experience - riding the thermals, virtually no sound whatsoever. It is so serene, so picturesque, so enlightening and so beautiful to see.

Then, I asked if I could invert the aircraft. “NO!” was the emphatic, abrupt reply. Followed by, “Do not touch anything from here on!” Whoa – abrupt and testy!

Invert Your Org Chart

So, how does this apply to your business? Picture your organization chart, or better yet pull it out and look at it. Certainly, you say. It’s is up-to-date! If not, it needs to be fixed.  

Typically, an org chart has the CEO (owner) at the very top. Followed by mid-management, department heads, administrative staff, and finally the field service and installation professionals.

 

STOP! INVERT!

Unlike what can be done in a glider plane, sometimes it is best to invert an organization. Turn the org chart up-side-down. Place those employees closest to the customer at the top, meaning field producers, salespeople, dispatch, and CSR’s. Those employees who interact with the customer everyday establish the company brand and culture in the eyes of the customer. It is these employees who prove to the customer that the very best team has been selected to provide solutions and to make sure the customer receives his or her money’s worth. It is an accepted fact that those employees closest to the customer provide the lowest cost solution to solving any problem. The front line must be empowered to act and rectify issues to maximize bottom line profits. Behind the front line on the org chart is the administrative support staff – the service manager, production manager, office manager, and bookkeeper. And at the very bottom is the CEO (owner) supporting the whole operation by providing a vision, a strategy, goals, reinforcement, guidance, leadership, and motivation. This type of organization provides the real payoff.

Consider it this way. The front line produces revenue whether face-to-face or via phone or digital contact. These are the everyday professionals who manufacture comfort and peace of mind in the customer’s home or with the customer on the phone. How those employees perform their job is the most important aspect of the quality of the job and the customer’s satisfaction.

If you “Go Inverted,” it may positively impact the culture of the organization. This new perspective may make a significant difference in how the field pros view the importance of their roles when it comes to customer “touches” and it may help the internal support staff understand that their primary roles are to support those employees who directly interact with the customer. 

 

What Else Could be Inverted in Your Company?

As long as you are contemplating inverting the org chart in your business, why not look at other aspects of the company to invert – including your financials. Certainly, an Income Statement has a standard format. At the very top is revenue - all income generated from your front-line producers. It is the top line. The top line is followed by the Cost of Goods Sold (COGS) line - equipment, materials, supplies, permits, labor, and labor benefits. The cost of goods line records all the costs of manufacturing comfort efficiently and productively.

Subtracting cost of goods from revenue produces the Gross Margin Line. This line shows the dollars left to pay bills. These bills are the Operating Expenses (Overhead) that are required to support the field producers and allow sales to grow. This includes office staff, marketing and advertising, insurance, utilities, communication, and vehicle expense. Essentially, this is all necessary costs so the field producers can accomplish their jobs.  

Finally, we get to the Bottom Line, net profit before taxes – often referred to as the dollars left for the owner / investors after everything else has been paid for. Profits are the dollars the equity stakeholders in the company (owner) must reinvest for growth and provide a healthy Return on Investment for the risk ownership incurs. Ah, yes! That leaves the wonderful income statement.

It’s quite possible the income statement needs to be inverted as well. Certainly, the owner’s profits are shown at the bottom of the traditional income statement structure because he or she is shouldering the operation by providing the financial architecture for success. However, profits are part of the first financial segment of the income statement that should be projected. Profits should never be considered as “left overs.” Profits are a bill that an owner submits to the business with the expectation that it will paid as all bills are paid. 

Profits are the priority and the sole purpose of the planning and budgeting process. They provide a healthy return on investment (ROI) for ownership, are essential for business model development, employee retention, and capital reinvestment. So, setting an aggressive but reasonable profit target is a paramount task.

Projecting profits first causes ownership and management to invert the planning process. Once management determines the profit requirement, all other aspects of the income statement are projected from the bottom up. Profits determine what sales must be and what the cost of goods and overhead must be to achieve the expected profits. They determine how many installations and service calls must be run to achieve the expected profits.

While you may not want to invert a glider plane, consider inverting your org chart and how you look at your income statement.  Who knows then you might decide to buy your own glider plane and invert it at your own risk!

 

Service Roundtable is dedicated to growing your bottom line and helping your business maximize its full potential. These group of contractors work together to assist you with marketing, sales, business, and so much more. Twice a month, seminars around the United States and Canada are held to network and further assist your business. Visit Service Roundtable.com to see if there are Success Days in your area!

Topics: Building a Business, Plumbing, hvac, Marketing, business culture, learning, knowledge, Management, team building, Leadership, Business Growth, Business Leadership, creative marketing, Branding, Customer Service

Posted by John LaPlant on Jul 20, 2018 9:00:00 AM

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