- The Right Target: The Triple Bottom Line
- A High Performing Organization SCORES Every Time
- The HPO SCORES Quiz: How Does Your Organization Score?
- HPO SCORES Quiz
Marksmen will tell you that if you’re going to aim for a target, you should go for the bull’s-eye. The reason for that is if you miss the bull’s-eye, you’re still on the target. But if all you do is aim for the target and you miss, you’re nowhere. Don Shula, who coauthored Everyone’s a Coach with Ken Blanchard, always told his Miami Dolphins football team that the target they were aiming at was to win every game. Was that possible? Obviously not, but if you don’t shoot for excellence, you never have a chance of getting there. That’s probably why Don Shula’s teams won more football games than those of any coach in the history of the NFL and why his 1972 Dolphins is still the only team in history to go undefeated for an entire season. So the target you aim for has a lot to do with your performance.
Wall Street and the pressures of business today make many people think that the only target that counts is financial success. Yet few, if any, businesspeople would want their epitaph to include their company’s bottom line—their stock price or profit margin. They might, however, want people to remember their contribution to the creation of a high performing organization.
Those who want to lead at a higher level need to understand what a high performing organization looks like and what is necessary to create one. They need to aim for the right target.
The Right Target: The Triple Bottom Line
In high performing organizations, everyone's energy is focused on not just one bottom line, but three bottom linesbeing the provider of choice, the employer of choice, and the investment of choice. This triple bottom line is the right target and can make the difference between mediocrity and greatness.1 The leaders in high performing organizations know that their bottom line depends on their customers, their people, and their investors. These leaders realize the following:
Profit is the applause you get for taking care of your customers and creating a motivating environment for your people.
Provider of Choice
Being the provider of choice is becoming increasingly more challenging. Competition is fierce as new competitors emerge unexpectedly. Customers are more demanding with many more options at their fingertips. They expect to get what they want when they want it, and they want to have it customized to suit their needs. The world has changed in such a way that today the buyer, not the seller, is sitting in the driver's seat. These days, nobody has to convince anybody that the customer reigns. People are realizing that their organizations will go nowhere without the loyalty and commitment of their customers. Companies are motivated to change when they discover the new rule:
If you don't take care of your customers, somebody else will.
In Raving Fans®: Satisfied Customers Are Not Enough, Sheldon Bowles and Ken Blanchard argue that to keep your customers today, you can't be content just to satisfy them; you have to create raving fans. They describe raving fans as customers who are so excited about how you treat them that they want to tell everyone about you; they become part of your sales force. Let's look at a simple yet powerful example.
What's the most common wake-up call that you get in a hotel in America today? The phone rings at the allotted hour, but when you pick it up, no one is there. At least they got the machine to call your room at the designated hour. The second most common wake-up call greets you with a recording. But again, no one's there. Today if you pick up the phone on a wake-up call and there's a human being on the other end of the phonesomeone you can actually talk toyou hardly know what to say. A while back, one of our colleagues was staying at the Marriott Convention Hotel in Orlando. He asked for a 7:00 wake-up call. When the phone rang and he picked it up, a woman said, "Good morning; this is Teresa. It's 7:00. It's going to be 75 and beautiful in Orlando today, but your ticket says you're leaving. Where are you going?"
Taken aback, our colleague stammered, "I'm going to New York City."
Teresa said, "Let me look at the USA Today weather map. Oh, no! It's going to be 40 degrees and rainy in New York today. Can't you stay another day?"
Now where do you think our colleague wants to go when he gets to Orlando? He wants to go to the Marriott so that he can talk to Teresa in the morning! Raving fans are created by companies whose service far exceeds that of the competition and even exceeds customer expectations. These companies routinely do the unexpected and then enjoy the growth generated by customers who have spontaneously joined their sales force.
Employer of Choice
Being the employer of choice is equally challenging. With highly mobile, competent workers in demand, employers must find ways to attract and keep their best people. Good pay is no longer the only answer. It is true that some competent workers will go elsewhere for a higher wage; however, today’s workers generally want more. They seek opportunities where they feel like their contributions are valued and rewarded—where they are involved and empowered, can develop skills, can see advancement opportunities, and can believe they are making a difference.
You will get little argument today if you tell managers that people are their most important resource. Some even argue that the customer should come second, because without committed and empowered employees, a company can never provide good service. You can’t treat your people poorly and expect them to treat your customers well.
Several years ago, a friend of ours had an experience in a department store that illustrates this point well. He normally shops at Nordstrom but found himself in a competitor’s store. Realizing that he needed to talk to his wife, he asked a salesperson in the men’s department if he could use their telephone. "No!" the salesperson said.
He said, "You have to be kidding me. You can always use the phone at Nordstrom."
The salesperson said, "Look, buddy! They don’t let me use the phone here. Why should I let you?"
People who are treated poorly tend to pass that attitude on to their customers.
Another reason that your people are so important today is because these days your organization is evaluated on how quickly it can respond to customer needs and problems. "I’ll have to talk to my boss" doesn’t cut it anymore. Nobody cares who the boss is. The only people customers care about are the ones who answer the phone, greet them, write up their order, make their delivery, or respond to their complaints. They want top service, and they want it fast. That means you need to create a motivating environment for your people and an organizational structure that is flexible enough to permit them to be the best that they can be.
Investment of Choice
Growing or expanding requires investment, regardless of whether the company is publicly owned, privately held, government, or nonprofit. All organizations require funding sources, through stock purchases, loans, grants, or contracts. To be willing to invest, people must believe in the organization’s viability and performance over time. They need to have faith in the leadership, the quality of the people, the product and services, the management practices, and the resilience of the organization.
If the financial success of an organization is a function of revenue minus expenses, you can become more sound financially by either reducing costs or increasing revenues. Let’s look at costs first, because in today’s competitive environment, the prize goes to those who can do more with less. More organizations today are deciding that the only way for them to be financially effective is to downsize. There’s no doubt that some personnel reduction is necessary in large bureaucracies where everyone just has to have an assistant, and the assistant has to have an assistant. Yet downsizing is an energy drain, and it’s by no means the only way to manage costs.
There’s a growing realization that another effective way to manage cost is to make all your people your business partners. For instance, in some companies, new people can’t get a raise until they can read their company’s balance sheet and understand where and how their individual efforts impact the company’s profit-and-loss statement. When people understand the business realities of how their organization makes and spends money, they are much more apt to roll up their sleeves and help out.
Traditionally, managers have been reluctant to share financial information. Yet these days, many organizations are responding with open book management. That’s because they realize the financial benefits that come from sharing previously sensitive data. For example, in working with a restaurant company, one of our consulting partners was having a hard time convincing the president of the merits of sharing important financial data with employees. To unfreeze the president’s thinking, the consulting partner went to the firm’s largest restaurant one night at closing time. Dividing all the employees—cooks, dishwashers, waiters, waitresses, bus people, hostesses—into groups of five or six, he asked them to come to an agreement about the answer to a question: "Of every sales dollar that comes into this restaurant, how many cents do you think fall to the bottom line—money that can be returned to investors as profit or reinvested in the business?"
The least amount any group guessed was 40 cents. Several groups guessed 70 cents. In a restaurant, the reality is that if you can keep 5 cents on the dollar, you get excited—10 cents, and you’re ecstatic! Can you imagine the attitude among employees toward such things as food costs, labor costs, and breakage when they thought their company was a money machine? After sharing the actual figures, the president was impressed when a chef asked, "You mean, if I burn a steak that costs us 6 dollars and we sell it for 20, at a 5 percent profit margin, we have to sell six steaks for essentially no profit to make up for my mistake?" He already had things figured out.
If you keep your people well informed and let them use their brains, you’ll be amazed at how they can help manage costs.
What about revenues? If you develop committed and empowered people who create raving fan customers, you can’t help but increase your revenues. Why? Because raving fan customers want to brag about you. They become part of your sales force or PR department, which increases your sales and/or visibility and makes your organization more attractive as an investment. Now you are a leader of a high performing organization.