Guest Authors: Tim Almack – Partner - Katz, Sapper & Miller (KSM) & David Roush – President – KSM Transport Advisors (KSMTA)
In life, as well as in business, the key difference between success and failure (or stagnation) is execution. More specifically, simply doing what you already know you need to do always improves the probability of success.
In our personal lives, this can mean exercising regularly, eating less, and spending quality time with our families. It can be extremely difficult to harness the willpower and schedule time to do some or all of the above. Sure, family members can make the execution easier , but a key factor to success is that you are relying solely on your own willpower, schedule, and decision-making skills to bring it all together.
In business, you are afforded one key advantage over your personal life – a team, with (hopefully) the same mission, vision, and strategy. Family and friends can make it easier for you to get to the gym, block off quality time, and keep you honest with respect to your diet. However, in business, your team is being paid to ensure group success. The main difference between high performing trucking companies and the average motor carrier is simply translating what they already know they have to do into action. Conversely, the underperformers gravitate towards cooperative complacency. Early in our careers, via discussions with trucking company executives, we quickly identified that many of the questions asked of these companies were largely and unintentionally rhetorical.
Q: “Do you have proper reporting mechanisms to measure whether you are making progress towards a defined objective?
A: “No, but our plan is to implement in the next quarter, as soon as the IT Dept., Controller (name the excuse)…. has time available.”
Q: “Do your employees have a clear understanding of what is expected of them? Do they know what is an effective use of company time?
A: “They should know. If they do not we will find someone who will figure it out.”
In 75 percent of the conversations, we could have saved time by simply answering the questions for them. However, for the other 25 percent, a clear trend emerged. Instead of just knowing the answers, they were Doing. Further, the results showed that narrowing the Gap between Knowing and Doing resulted in higher margins (gross and net). As a reader, you will likely think that this is simply common sense. In life and in business, the spoils typically accrue to the ‘doers.’ Despite this simple fact, many people and teams are quite comfortable sitting on the ‘average’ fence. If that is the case for your business, you can stop reading. If not, we want to introduce a simple path to reduce the Gap between Knowing and Doing in your business.
The following process and concepts make the assumption that you have done (at a minimum) the following:
Crafted a company mission statement, which matches the values of both owners and employees. This mission statement addresses the operating attributes and realities of your business and industry. The mission statement should both inspire your team, as well as provide a prioritization roadmap for each team member (e.g., we will do this, or we will never do that).
Completed a simple S.W.O.T. analysis. You have identified, as a collective team, the Strengths, Weaknesses, Opportunities, and Threats of (and to) your business. This is a mandatory step in crafting a quality strategic and tactical plan.
The Knowing-Doing Gap is the name of a book by Jeffrey Pfeffer and Robert Sutton. This must-read book, using multiple case studies, details why some companies are able to successfully execute, especially when they have the same (or similar) resources as their competitors. Among the many important extracts from this book, the most valuable, in our opinion, is a way to measure and prioritize where the largest gaps between Knowing and Doing exist in your business.
Prior to our recent TCA Profitability Seminar, we asked both registered attendees, KSM clients, and Truckload Indexes subscribers to complete a survey to identify (in aggregate and anonymous format) the largest gaps. In order to extract the highest value and insight from this survey, we asked each company to consider having multiple people in their businesses complete this survey. Having executives only complete this survey presents an obvious bias to the results, likewise, having only frontline workers complete this survey attaches a similar, but opposite, bias.
Instead of presenting our results in total, we have opted to provide the results and insight over the course of five distinct articles, each focusing on one of the five core subject areas of the survey and its results (employees, organizational structure, sales and marketing, operations, financial management). For this article, we will focus on the first category – employees. More specifically, understanding the common execution deficits with your most valuable asset – your people.
For each of the five sections, respondents were asked to rate five questions (practices) on a scale of 1 to 10 (10 = Strongly Agree that the practice is important to the performance/profitability of a trucking company, 1 = Strongly disagree that the practice is important to the performance/profitability of a trucking company). For each question/practice, the respondent is asked to answer from a ‘Knowing’ point of view (essentially how important the practice is to their business), and from a ‘Doing’ point of view (how effective the business is at executing on that practice). The optimum results would be that the Knowing rating is as close as possible to the Doing rating for each practice (thereby reducing or eliminating the gap between the two). For the employee section of the survey, each respondent was asked to apply the rating scale described above to the following five questions (practices).
Employees know the company’s vision and understand that their activities support its realization.
Employees are focused on generating profits and have a plan to follow.
Recruiting procedures result in the highest caliber driver/owner operator and operations staff.
An evaluation process is in place that lets employees know where they stand throughout the year.
Managers are effective and bring out the best in employees.
Keep in mind, the respondents to the survey were heavily weighted towards senior management. To improve the credibility for specific company results, it is recommended that a minimum of 40 percent of employees complete this survey, including all senior management.
To display the results for this section of the survey, we felt the use of a Radar Chart (above) was the perfect way to visualize the results for each question/practice. To interpret, with reference to the scale previously described, the larger the space between the red dots and the blue dots on the chart indicates a larger Gap between Knowing and Doing. Logically, Knowing results are almost always rated higher than Doing.
As described earlier, for business and in our personal lives, we very rarely reach the optimal strategy or goal set. Human nature always takes over – there is always room for improvement.
Practice 1 - Employees know the company’s vision and understand that their activities support its realization.
Results = Knowing 9.29 / Doing 7.06 / Gap 2.23
As previously mentioned, one of the basic assumptions is that participants in this survey do in fact have a formal mission statement, or at the very least, some form of a basic strategic plan. Among all questions/practices within the survey, this one provided the third-highest rank from the Knowing perspective. Keep in mind, the focus on this survey is to allow organizations to understand where the organization’s planned strategies, tactics, and activities are not congruent with what is actually being done. In others words, some questions/practices will score lower from a Knowing point of view (perhaps it is not particularly important to the organization). However if the Doing rank for that question/practice is close to the Knowing result, it would indicate that company’s workforce is on the same page (frontline vs. senior managers). A smaller Gap overall, and for each question/practice, is desirable.
Since most of the respondents were senior managers, we expected to see a high relative Knowing score for these particular questions, as a company’s mission is typically near and dear to principals and executives. However, for the individual results, we saw wildly different scores within the same organizations (Gap scores as high as 4.8). What can a company do to lower their Gap? First, take a closer look at your mission statement and ask yourself these questions. Is it based in reality? Is it written from the perspective of the shareholders only? Does it incorporate both the company’s ambitions and its values? If not, management should consider whether the mission statement and values should be updated or modified. Second, and most important, management’s day-to-day actions must be aligned with its mission and values. Having a mission statement on a webpage or a plaque near the reception area is not enough. The mission statement and values must be communicated and reinforced to employees and customers in every action of the company.
Practice 2 - Employees are focused on generating profits and have a plan to follow.
Results = Knowing 8.76 / Doing 6.00 / Gap 2.76
The whole point of running a business is to produce or provide something of value for customers. Inherent in this pursuit is generating revenue which exceeds the expenses realized in the production of this product or service. If that was not the case, there would be no incentive for entrepreneurs to start and build their businesses. Profit is the key yardstick for determining if the strategies and tactics employed by organizations are effective.
Profit is not a bad word – your workforce should understand this fact. Profit allows businesses to grow, employ more people, develop unique products and services, and solve endless amounts of problems. Profit provides a path to purpose, for both shareholders and employees.
Communicating the company’s profit expectations is important, as is providing timely updates with respect to progress relative to those targets. More specifically, providing team members with an understanding of where the company is relative to the profit targets that have been set on a regular basis, and the factors that are directly influenced by their daily, weekly, and monthly actions that lead to higher profits. Being transparent with these targets and reporting regularly against these targets is crucial. Setting, measuring, and reporting on profit expectations and results will reduce this Gap and will lead to higher margin.
Practice 3 - Recruiting procedures result in the highest caliber driver/owner operator and operations staff.
Results = Knowing 8.47 / Doing 6.29 / Gap 2.18
In a tough labor market – which is an ongoing struggle for the trucking industry -- the pressure to relax or ignore established hiring standards and practices grows. Your recruiters are probably incentivized (in part) based on the number of new hires they bring in the door. Likewise, your safety team feels the pressure from operations to get that truck seat filled. Similarly, for non-drivers, many companies are communicating a similar shortage of quality people to fill available roles.
How does a company establish hiring standards and criteria that can be adhered to despite the growing labor squeeze? Reducing the Knowing-Doing Gap is important, however, this one is tricky. In order to reduce the Gap here, especially in today’s market, the default lever is to revisit the hiring criteria and standards that recruiters are using. Yes, the short-term benefit is that a seat is filled and the opportunity cost of an unseated tractor is reduced. However, in the long term, lowering standards has a ‘long tail’ effect. Sacrificing long-term stability and viability for short-term profits is a dangerous strategy. The message here, keep standards high. Wait for the right hire. Incentivize based on quality, not quantity. Be the contrarian.
Practice 4 - An evaluation process is in place that lets employees know where they stand throughout the year.
Results = Knowing 8.29 / Doing 5.59 / Gap 2.70
If you do not have a regular employee/contractor evaluation process in place, you are not alone. In fact, many companies with a formal evaluation process are not using an evaluation process effectively or regularly. We expected to see a relatively high Gap for this practice. Further, when more team members are included in this survey process, the hypothesis is that this Gap will be larger.
If you don’t have an established evaluation process in place, you are missing out on a very important opportunity to understand what is happening in the business. Regular team meetings are typically skewed towards either ‘group think’ or dominated by a handful of strong personalities. Getting one-on-one time with each team member on an annual, semi-annual, or quarterly basis is one of the most important component of an effective evaluation process. During the evaluation process, consider asking your employees what they like best about their job, what they find most frustrating, what their business goals are, in what areas would they benefit from training, and most importantly, what ideas they might have for improving company profitability. Finally, do not underestimate the power of understanding where a team member stands relative to expectations, good or bad; this is extremely important to providing a sense of purpose for your workforce. A sense of purpose always ranks higher than compensation with respect to employee satisfaction surveys. The key takeaway – if you do not have a formal and regular employee evaluation process, develop and implement one in Q1 2019.
Practice 5 - Managers are effective and bring out the best in employees.
Results = Knowing 9.24 / Doing 6.59 / Gap 2.65
We expected the Gap for this question/practice to be lower, since most of the respondents were Senior Managers. What this relatively large Gap indicates is that the respondents are capable of introspection (a rare trait), and acknowledge that more work needs to be done with respect to effective leadership and direction.
Since we could write an entire a book on this question/practice, it is very difficult to summarize in one paragraph the key takeaways. However, here are some suggested immediate action ideas:
Span of control is a problem every manager encounters. Determine whether your managers are managing too much or too little.
Investigate whether managers are delegating responsibilities and tasks, and then failing to hold their staff responsible for timely, accurate, quality jobs.
Make sure your managers and their support groups are trained on how to effectively implement business ideas and strategies.
Opening lines of communication and connecting remote teams is something that should always be a key priority for any business. Having regular, short (and mandatory) meetings or debriefs should provide enough dialogue to establish a feedback loop to keep the team marching in a positive direction. With multiple and distributed workforces (including drivers), consider employing regular (weekly or bi-weekly) conference calls and webinars for reaching a higher percentage of your team. We also strongly suggest implementing an instant messaging service, with topic-specific ‘channels’ to effect change more rapidly on that important feedback loop.
In our next article, we will focus our attention on the Organizational Structure section of the Knowing–Doing survey.