The Reluctant Entrepreneur: Greatness, Save or Sell

Rajesh, like every employee of Zarhak multitasks. While driving me to the airport he brought to my notice that while we had semi finished material on our shop a truck bound for FORD had left with a lot of space, why could we not have filled in more?

His question reflected my faith in goan employees, they come with a thinking cap, and that makes a huge difference between then and employees from other states. The crux of the question he was asking is it it good enough to manufacture and be happy? Or is there more to it?

We have always pushed productivity and savings as a way of life at Zarhak. This was achieved by using the principles behind Kaizen, Just InTime (JIT) and Total Productive Maintenance (TPM). Kaizen ensured that every employee thought of saving in small ways, putting off a light here or putting masking tape on a tear to prevent raw material wastage. Just In Time ensure we produce only to order so that there was no dead inventory sitting on the shop floor. With TPM we pushed machine utilisation from a Company perspective, it was not just about machine maintenance, it involved purchase and sales too. Together these concepts drove our quality initiative which was reflected by our quality concerns on one hand and kept our costs down on the other.

In order to decentralise and avoid confusion, we have fixed prices and standard policies. So if a customer approached us with a big order for tanks from Bangalore, we gave him a price which worked our more expensive because of the additional freight. Invariably we lost such business.

Two, years ago we were exposed to another management concept, Theory Of Constraints (TOC)” expounded by the late management guru, Eliyahu Goldratt. A trained practitioner, had returned to Goa and hence the expertise was available locally. It made a difference as even if a company was interested the costs of hiring non Goa based consultants was exorbitant. To my mind TOC simply put stated that cutting cost would increase your profits, but if you increased your top line, your profits would increase dramatically. A combination of cost cutting measures on one hand and techniques to increase sales on the other would effect the bottom line in dramatic proportion.

We did make take steps to increase sales, and we did not lose orders from Bangalore because we adjusted our selling price to compensate the customer for the additional transport. It made sense, the positive contribution added to the bottom line and we has used existing resources. On the other hand, allowing the vehicle to leave with space when we had semi finished products on the shop floor was violation of the concept. Had the supervisors been fully tuned to the situation they would have reallocated resources to finish the parts and get them on the truck, thereby increasing the sales.

Now they would be left as inventory till the next consignment was dispatched and always open to a schedule change. The thinking should be sales in the key, just producing or manufacturing is not enough. A sale is not closed till the correct part is delivered in time at the minimum and earlier if possible.

One cannot expect to SAVE a company to greatness, one must sell your way to greatness. Whoever said these words knew exactly what he was talking about.

Suggested reading: The Goal by Eliyahu Goldratt

The Reluctant Entrepreneur: Technology

“Tying a knot in your handkerchief”was used in the old days to remind you that you had to do something. In today’s continuously multitasking world this method would hardly suffice. Fortunately, technology has kept up and we can have “knot” free handkerchiefs in our pocket.

When we started our ISO 9000 journey, we had to make maintenance calenders, print each month with a square for every date and then fill the relevant square with the activity. Later, complimentary desk planners made it easier. However, you had to transfer the activity details at the end of every year to the new planner. Now, thanks to google calender, you just create an event viz: “Overhaul Crane” , and the same can be automatically repeated yearly or half yearly for any number of years. You can ask the calender to send you a reminder email a few days or hours before the actual event, or even ask for a pop up on your screen so you do not miss out while you are engrossed in your daily work. The event can be set up to send an email to others who may be involved in the event. In case you wish to set up a meeting between two or more people you can exchange calenders, overlap them and find a common free time so the meet can happen. You can make reminders for important dates related to Income Tax, Central Excise, Labour, Directorate of Industries various license and NOC renewals etc.

Every time, I worked on a file at home or my office, I would email the latest version to myself so that I could access it where ever I chose to work on it again. It was quite painful to find I had forgotten the latest version on my desktop and I was now working on my laptop. Either, I had to redo or postpone working on it. Not anymore, I now use DROPBOX or more recently GOOGLE DRIVE. These are cloud based applications which allows you to store your work on the net and you can work from any device anytime as long as there is an internet connection. The applications sync immediately when the device is turned on so you have the latest version of your work to continue working.

This also is of great use when you send a file to many. Each recipient edits the file separately and the problem is that someone has to collate all the changes at one place. Invariably it never happens. Recipient A makes changes and hits reply all, at the same time Recipient B makes his own changes and sends to all, all of a sudden there are three versions and mostly with the same name. There is a solution again in google, “SHARE” the file. All changes are saved and every recipient is looking at the current updated version, you can also make comments which other can see. There maybe other applications which do just this, check it out, it is just that I prefer GOOGLE.

The Blackberry is fast losing out to the likes of Samsung or Apple. What they started is to be appreciated and used. Emails come directly to your phone immediately. Editor Harsh sent me an email on Sunday, asking questions on collaborations, I opened it replied. If I had to log in and then answer it might not have got done till Monday at the earliest. This is one mobile phone application which I see has a major downside, we are online 24x7. Earlier, one such to shut down your system and delinked till the next time you “power on”. Now, even if get up at 1 A M to drink water, you will see the ominous red blink and check your BB. 9 out of 10 times you will reply in your sleep. The solution is “airplane” mode. On to ensure alarms go off but “off” enough to be disconnected.

Technology is a game changer, and if we can spot its uses quickly we will benefit, our business will benefit.

The Reluctant Entrepreneur : Pulling the plug

This is an issue no one wants to talk about leave alone face. It is an issue every entrepreneur will be faced with often. When is enough, enough, when is it time to throw in the towel or simply call it quits on a pet project. It does not matter if you have started a small manufacturing unit or you are the head Honcho at Kingfisher, this question will come up.

At business school, a class mate came back after the break and had his recommendation becoming the talk of the class. To graduate one had to do a thesis on a company and utilise the learning in class to improve strategically the performance of the Company under study. He recommended shutting down the Company. No amount of advice got him to backtrack. Everyone waited with baited breadth for him to emerge from the viva. Surprise, he got a D, the highest grade.

After studying the projected future cash flows based on historic and potential sales, projecting operating expenses he had concluded that the best option for the Company was to close down, There was no point in good money chasing lost money. His logic rather than bankrupt the promoters by continuing it would be preferable to shut this loss making operation and use the money saved to get into a new business with a future.

So many products become dated, for e.g. black and white TV's. Yet, despite the writing on the wall a Company in Verna continued producing them and did nothing to shift to colour TV's. Ultimately forced to close. Why did the management wait so long? One reason is simply “blinkers” are on, they are not willing to see the writing on the wall. The other reason is that it seems easier to continue as what next is not discussed.

Can you look at the rear view while driving your business and check what is coming up from behind. The way to do this would be reading, tracking the technologies and planning steps to ensure that the dangers or pitfalls coming up have contingency plans. In our own business, it could be say tanks with colours, different shapes or maybe a new technology – blow moulded water tanks. We can easily say blow moulding is for small bottles and thus not a threat, but the blow moulding machinery manufacturers are working over time to make their technology more relevant and larger products say a water tank is a natural quest.

We cannot stop them, what we can do is look at ways to reduce our dependance on water tanks, find new uses where our rotomoulding technology would break new ground. If you are driving a company you too should think about loo king at the rear view sooner than later.

We do not have to consider closing down the whole company, we can even look at product lines or a product. Keeping a track of the sales year on year, the competition's features against yours, the margin the product delivers will help you decide. We used to make an insulated box. The features of our box included no air pockets in the insulation, was heavier and therefore our box cost more that the competitors. We killed the product despite its superior performance. The target customer in those days for us was soft drink companies who gave each street vendor a box to keep their products chilled. The box had to be replaced every year irrespective of the life. So they preferred a cheaper product which they would replace every year. In hindsight our decision may have been wrong, what another company saw was a market for the same boxes but in the food business where quality of the box mattered. There are no easy answers, we killed the product another Company made a killing by looking at things differently.

The moral of the story is decide what is best for your Company at that time and just because someone else is making money or might make money should not guide your decisions with reference to a product or Company that is losing. Shut it down if all else has failed so you may live to fight another day.

The Reluctant Entreuprener: Building Workforce Trust

How an organisation will respond to disciplinary issues will be decided while in its infancy. If at the start the Boss is strict or lenient, it will set the tone for the organisational culture in future. Discipline to my mind is a function of trust the employees have in their management.

Handling, my first brush with a potential disciplinary situation as an entrepreneur, went in my favour and set the tone in a good way. One morning, I noticed that none of the workers had entered the factory even though is was time. I went out and found the 10 odd employees standing in a group, one of them brusquely told me that my supervisor had instructed them to enter from a particular gate and since it was not open, he said they were waiting, despite the fact that another door was open.

Two thoughts were screaming in my head, how could this worker speak to me in this tone, was I not the Boss. The other knowing he was making a point. One was a reflection of the irritation I felt because the work had not started in time and the other the voice of reason.

I suppressed the irritation and focused on the reason. I ignored the tone and focused on what was being said. I reasoned with myself that since he had no particular training in speaking he was making his point as best he could and to his mind he was doing the right thing following instructions while believing the rule to be unreasonable. I asked him would it not be better to talk to me about his thinking on the rule of using a particular door rather than trying to grab my attention by stopping work. Would it not be better to take 5 mins to discuss the issue while the shift was on. He agreed. So I asked him to go in through the open with the others and and start the shift, while promising to talk to the supervisor and finding out why he made the rule.

This set the tone, one dialogue was the key to resolving any issue, stopping or hampering wok was not a solution and most importantly supervisors were important. Had I focused on the tone the matter would have taken a different turn, had I forced then to go through the open door, the supervisor would have got undermined and in future when he said something it would be disregarded. By shifting the focus to dialogue we set the tone and it has worked for us, after 17 years of operations we have not a manday because of stoppage of work.

The other interesting feature of man management is an ability to accept that management makes mistakes and these mistakes must be acknowledged and corrected if possible. Increments are normally announced ¾ months after the due date due to delay in evaluations, but they are paid w. e. f. the due date. However once year it was brought to our notice that overtime was calculated at the old rate and now since the new rates were retrospective the overtime should be recalculated an difference paid. The advice available that since it is difficult to recalculate the same should be ignored as the amount would anyway not be much. What I saw was the fact that “trust” was involved, the employees agreed to a delay in increments to accommodate our evaluation procedure because they believed it caused no loss to them. Therefore it was not the amount in question but the principle. We recalculated the overtime and paid the difference. A small amount but a large step towards building trust.

I used to notice employees left on the 7^th of the month after collecting their pay. I assume they felt that if the quit earlier they may not have got paid. We made it a point to pay the salary for the 7 days. The message went out to those who were still with us, we were not going to short change the employees. Never the less the practice of quitting on pay day no longer exists.

Be firm and fare and your new years will surely be good. Happy new year.

The Reluctant Entrepreneur: Credibility

When we started, and because of our JIT (just in time) policy very often we had no reason to produce as there were no orders. It was at one such non productive moment when a government contractor approached me for a huge order of tanks. His condition was simple, He wanted X to be the price I would agree to charge, Y would be the price we would bill the Government. The difference between Y and X I would return to him in cash. The quality he was not concerned about and if needed, we should reduce the weight to ensure we too made money.

Despite the fact that we desperately needed orders, we turned down the business. The logic was that after a year only we would be responsible for the product. Every one would see poor quality SHAKTI tanks and no one would know what price was paid for them. Today, 18 years later that decision is paying rich dividends, there are no poor quality SHAKTI tanks on any roof in Goa or elsewhere.

I got a call from a walk in customer inquiring about the price of our tank. I gave him the list price. He told me that he was offered a price cheaper than that by our dealer and since he was coming to us directly he expected us to be cheaper. I informed him that we had a pricing policy where the dealer was not under cut, while at the same time ensuring that the dealer did not overcharge. It was apparent that the dealer was not overcharging.

The customer told me that I should undercut the dealer and that he would keep it a secret. I explained to the customer that maybe the dealer would not know I undercut him to save a few rupees, but surely he would know I cheated the dealer. Since the tank cost much more than the small dealer margin, would the customer not be wary of my product and wonder what I was going to do to short change him, since I had no qualms undercutting the dealer.

Fortunately, for me the customer saw my point and did not press any further. He however went back and narrated the story to the dealer. The dealer called me up and thanked me for taking care of his interest. There was no need of a special thanks because our policy was to take of of stakeholder interests, the customer always gets a good product, the dealer gets his margin and therefore, we get our profit.

In the plastics industry usage of recycled material is normal. The reason is simple, customer cannot tell if the material used is the promised virgin grade or a mixture of recycled and virgin or simply recycled. The choice of what material has a major effect on the cost. Right from day 1, we have ensured that a customer get what he orders. So, if the customer orders a product of recycled material the Purchase Order will say so. Every employee on the shop floor knows that mixing is not allowed. Over the years many employees have left and joined other companies, some have grown to decision making positions. This factor is well known to them and they have no hesitation in paying the price, because they are assured about the quality.

If you look at the three cases mentioned above you will see that in no case is the return immediate, nor is there any chance of manufacturing the crediblity many years down the line, either it is in the company's DNA or it is not.

Had we sold poor quality tanks to keep our line running, what would be the explaination we would give today? Had we sold the tank directly to the customer we would have lost very importantly on credibility, credibility with the customer buying, and surely credibility with the dealer. Were we in the habit of mixing would that fact not leaked to the market over the years?

This credibility is not possible to purchase nor can it be made available instantly. This is something a company deposits over its lifespan and withdraws at crucial junctures of the product lifecycle.

I must add here that the same is applicable in our life. Sometimes, we too goof up in the short term and pay the price over the long term. The moral of the story is “THINK LONG TERM”.

The Reluctant Entrepreneur: Anniversaries, Awards and Second Line

It is always a good feeling to complete another year. Congratulations to Team Business Goa for another year in operation, another year to look forward too. We too completed another year, not from the day we were incorporated but from the day we sold the first product. I believe any establishment worth its salt can only be acknowledged if it is meeting a customers need.

So every Company should focus on customers if it wants to stay in there and be relevant. There are different ways or theories that companies will use, customer satisfaction surveys, customer feedback or as in the case of Apple, deciding what the customer needs and being right about it. I would like to look at another aspect of being there to serve the customer and that is building a “Second Line”.

Today, more than ever we have all types of awards for Corporate excellence. To my mind awards come in the following ways, 1) Analytical: CII Exim bank or Rajiv Gandhi National Quality Award. 2) Perception: Corporate awards which recognise excellence to promote brand attributes or positioning.

Business Goa or GERA Big FM awards etc. 3) Paid: Yes paid. This is where you get a letter saying you have been selected and to be eligible you have to become a member.

We have had our share of the first two and we have had offers for the last category they are not worth talking about. It is the analytical category which is the type which needs more visibility. Actually I would be happy if this visibility helped more of my readers to apply for this award. Yes, this type needs to be applied for. There are huge benefits in just applying, the bonus would be if you also win.

Being associated with CII, which handles the CII Exim Bank award, I got to see first hand the advantages of how these awards encourage organisations to strengthen their management systems, practices and capabilities to enhance and sustain their competitiveness to become world class. This award is based on the famous Malcolm Baldridge National quality award of the US and other similar awards. I decided to take a baby step and applied for the Rajiv Gandhi National Quality Award of the Bureau of Indian Standards.

The investment is lower but the process is similar. The awards committee reviews every applicant on the following points, Leadership, Human Relations Management, Process, Customer Focused Results, Impact on Environment and Society and finally Business Results.

After preliminary study of the documents the company submits, some are shortlisted for a site visit. Post the visit irrespective of the results, the team gives advice to the company under review to improve. It is like hiring a consultant.

In our case while we scored well on all aspects we had a low score on leadership. I was taken aback, I fancied myself (kidding). The team leader explained their logic. They felt if I as head of organistion was removed from the leadership, the organisation would have difficulty to survive as there was no second line visible. That hit me.

We did take note of this observation and made the necessary improvements. Today we have that second line in place, thanks to the third angle view we got a dozen years ago. I can let you in on a secret, if the owner manager has a good second line he can take a holiday. Go ahead pick some awards, it can surely do your organisation a lot of good and see you through many more anniversaries.