Archive for November, 2006

Often used, however not truly understood, is the comment that people are six degrees of separation from one another. If you’ve ever wondered about its origin, here it is.

In the 1960s a psychologist named Stanley Milgrim tackled the “small world” concept. (The theory was first proposed in 1929 by the Hungarian writer Frigyes Karinthy in a short story called “Chains.”) He started a chain letter with the names of 160 people who lived in Nebraska and Omaha and sent them a chain “Packet.” Inside were instructions by which the recipient was to write in their name and then forward the package to someone they knew who might be able to get the package in the hands of a stockbroker in Sharon, Massachusetts, outside of Boston USA.

The rationale was that each person would try to send the package as close to Boston as possible. It might be to a cousin, friend or co worker. When Stanley finally opened the packages, he found that most packages had five or six signatures, hence, “Six Degrees of Separation.”

Twenty four packages reached the stockbroker’s home. Sixteen were given to him from the same person: a clothing merchant named Mr. Jacobs. The rest were given to him at his office, and most of them came through two men. Surprisingly one half were through these three people.

Malcolm Gladwell writes, “Six degrees of separation doesn’t mean that everyone is linked to everyone else in just six steps. It means that a very small number of people are linked to everyone else in a few steps, and the rest of us are linked to the world through out those special few.”

This means that there are connectors in the world, and that if you traced back many of the people, you know you’d find similar parallels.

The question is, what are you going to do about it or will you now try to become one of those connectors?

Now just think about how close you may be to someone!

Interesting information.

One of the first things you learn as a student pilot is that your dashboard is your friend. Even if you can’t see out the window of your aircraft, the information in front of you can take you to safety.

The trouble is the dashboard is so complex that at first you’re overwhelmed. So many gauges. Fuel, lights, altitude, speed, your horizon, transponder, the list seems endless. If you’ve ever looked inside the cockpit of a jet while boarding a commercial plane, you realize that flying a plane is not anything at all like driving a car.

The trick is to learn what’s critical, like where your eyes should be scanning frequently to help you make the best decisions. In flying a small aircraft, there are six gauges that make up the core essentials. Although the others need attention, if you keep track of these six, you can fly and fly safely.

Business is no different. There are gauges that tell management what’s important and what to watch out for at each level of an organization. For example, you’re a CEO who looks at revenue, turns on inventory and inventory levels, cash on hand, projected sales in the pipeline, A/R and A/P, and stock price. These elements make up your DASHBOARD.

The numbers from each gauge give you a sense of what’s going on in your business even if you’re not doing the job yourself. Good management is always scanning and adding insight into the figures. The DASHBOARD reports what percentage you are up or down over the last few years with a click of a button.

Technology advances in this area have been incredible. Just 20 years ago to put together some of this data may have taken a week. Now, with tools that can deliver just-in-time information, dashboards allow for better decision making.

Compare the CEO’s financial and operational gauges to flying a plane. Think of the value of knowing that you are at 5,000 feet while heading in the direction of a mountain range that is at a minimum 10,000 feet. With this knowledge, you can make immediate adjustments. Now picture the same scenario where you don’t get the information for at least 20 minutes as your co-pilot has to gather the data.

The Digital DASHBOARDS we have today give management just the same benefits in making decisions such as heading into a slower season with too much inventory. Sales staff could be notified to move the merchandise so that your cash position can be improved.

But you already know this. Don’t you.

The challenge I’ve seen in companies comes down to people not really paying attention to the dashboard even though it’s right in front of them.

The head of an accounting department has software that when opened, gives a digital picture of the company: A/R, A/P, cash on hand, quick links to the Income Statement and Balance Sheet, as well as other gauges. Even though this information is displayed the first opening screen, the management skips the quick scan. Now tactical activities, such as making sure checks go out to vendors, data is posted properly, properly, customers are paying in full and on time are not addressed…sometimes for weeks at a time.

True the tasks of A/P are important, but they are tactical. The role of those that open up such tools is to always take a second to say, does everything look right. Sales good? Accounts receivable in shape? Cash position strong? If you aren’t watching the dashboard and reacting to its data, you might hit a mountain.

But even if you avoid slamming into the mountain, letting something sit for too long translates to a lot of research later and often trouble with vendors and clients. An invoice 50 days old on a client account marked “pay upon receipt” means trouble. You’ve now got to check history. Confirm history. Make the call or email. And they then take their time, because it’s not current.

Everyone throughout the organization, in key positions, should be always watching the digital dashboard just to make sure everything is working the way it should realizing that OLD data or PROBLEMS are a big issue for the organization down the road. If you’ve ever tried to collect cash from someone due to an oversight missed nine months ago, you know the feeling.

Make sure that you look at your gauges often and then more importantly ask yourself, “Does everything make sense? Does it look right?”

If you’ve got people who avoid doing their function, they are not the right people for the job. Management is about thinking. Digital dashboards help you make the best decisions.

Think strategy versus tactics. You want people to keep you from hitting the mountains by giving you an early warning while keeping you on target.