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Are Annual Staff Appraisals worth it?

It’s the first quarter of the year and time for appraisals.  Second only to firing, business owners cite appraisals as the task they dislike the most.  Is anyone a fan of appraisals or is it old fashioned nowadays.  A once a year review is too late and often comes as a surprise to the employee.  How can people judge an entire year of work, some of our members felt that they were a waste of time with forced ranking eliminating great people and damaging the business culture.

This topic was discussed by our members at a recent meeting of the Business Exposure Group.

Are there any benefits of performance appraisals?  Is it just documenting what is already known.  Should we feel obligated to do appraisals just because everyone else does them?  70% of businesses conduct appraisals only once a year, but are appraisals just for the employer to clarify and articulate their vision.

Often an appraisal is just based on opinion and not on performance measurement.  It can undermine harmony and fail to encourage personal best performance.  Disagreement over judgement can create conflict that can fester for months which is counterproductive.

Most of our members felt that appraisals should be separate to the annual wage rise. “Appraisals should be a fair validated way for salary reviews / record of low performance when we let someone go / way of monitoring effectiveness of the manager”.

But for some it is political correctness gone mad.  In sport you have a winner 1st, 2nd, 3rd.  So, why is it such an issue in the workplace.  Rather than talking about what the employees have learned and how they can grow, they instead resort to a number out of 5.  The most valuable part of an appraisal is the development planning conversation; what can be done to improve.  Yet, this is often left to a small bit at the end.  And, if that happens, then the appraisal just becomes an HR box ticking exercise.

A regular ‘performance management’ system is better than a yearly appraisal.  People are inspired by positive constructive feedback, and the appraisal process almost always works against this.  New ways could include:-

Feedback rich culture for all employees

Separate discussion about performance from career development

Let employees create their own goals

Force managers to give ongoing feedback

Force employees to self-assess

Encourage high performance

Set goals regularly. Quarterly goals in businesses with performance management show 30% better returns and those that do monthly goals get even better results

Some business owners questioned whether it is worth the cost, eg a manager costs £50 per hour, employees £30 per hour.  So say 3 hours each time allocated = £240 x say 20 staff = £5K in total to appraise 20 employees.  Apart from taking up too much time, it can also be unpleasant to rate someone.

An appraisal / performance management certainly has value in building relationships between employer and employee. In many cases, it is the only time an employee gets uninterrupted access to their employer.  One of our members commented that when appraising one of his employees they stated ‘In 10 years of working this is the first time anyone has even bothered to sit down and tell me how I am doing’.  But, if we don’t do performance appraisals well, then we are better off not doing them at all.

These meetings are where you formalise the performance of the employee, not where you spring bad news on them.  Forget feedback – it invites defensiveness.  Use feedforward, it focuses on what you want the employee to do in the year ahead.  It focuses on how they can do better, not what they have done wrong.

Employers are now starting to use cloud bases appraisals.  The technology of sharing relevant performance will turn performance management into an ongoing process.  It’s about targeting a specific area of weakness – not a career path, and it’s about inviting constant feedback from a variety of stakeholders who can have constant input into the work development of our employees.

Above are just some thoughts on how best to monitor individual staff performance!




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What does a successful Business look like?

In business what does success mean to you?  High income, title, prestige, awards and accolades, enjoyment of work, pride, connection with colleagues, meaningful company mission.  This was the topic discussed by members of the Business Exposure Group at our recent meeting.

Financially a business that exhibits 10% growth each year is considered success orientated – they have to be future focused.  But, what is success?  Is it money, or sales, or the influence your actions have on the environment around you?  The goal simply is to keep the business afloat until you have figured out how to achieve success.

Some of our members suggested the following as indicative of success.

  • Company culture – attracting and hiring the right staff who fit into and drive behaviour
  • Having a Business plan with financial / differentiators/ product strategy / employee retention strategies
  • Discipline to stop overreacting to market changes and adjusting your core strategy to keep up. Saying No is fundamental to success
  • Creating predictability with business processes
  • Understanding the pains your clients are experiencing and providing a much needed product or service
  • Continuous change needs a culture of continuous training for staff development
  • Greater use of technology to achieve business goals

Businesses need to embrace continuous innovation to make sure they offer something more than their competitors.  43% of SME’s consider a strong customer focus as the most important element to a successful business.  Understand where all your customers are coming from as this allows you to scale your business; it empowers you because it tells you what works and what doesn’t.

Businesses need to create and maintain a culture of accountability.  An optimally run business will outperform a business running at maximum performance.  Choose security over growth.  Narrow your horizons and become an expert, focus on markets which are growing or stable and look beyond your geographic location. In times of change, experience can be your worst enemy.  Be willing to change even if it means plunging part of the company into confusion for a while.

According to the Institute of Directors there are 10 characteristics of a successful business:-

Leadership / culture / financial literacy / systemise / staff development / everyone sells / dress work environment for success / compensation growth / strong brand / give back to the community

But further comments by our members suggested success to you as a business owner means –

-delegating and paying others to do all the stuff you were doing for the last 10 years

– the business can be sold

-you can go away on  holiday and earn money at the same time, leaving competent staff in charge

-the company has made it onto the first page of Google, without paying for the privilege

-you can now pick and choose your preferred customers

Business success is not all about growth.  But many feel pressurised into constantly pushing for growth.  One of our members explained that one of his worst decisions recently was to take on a volume contract, which had a low margin.  His business turnover increased by £1m, but the problems of taking on this added revenue were far worse than the benefits.  Staff problems, quality problems and cashflow to name but a few.

One of the Business Exposure Group members said ‘By the time we hit 6 years our team was smaller, our revenues were down but our brand was solid and we were more focused than ever, but, I felt like a failure because we weren’t bigger and making more money’.  But he was on his own in the Group.  For the majority, turnover was one thing, but profit and contentment were the true indicators of success.

Make sure you celebrate your successes, even the little ones.  Build something you believe in and prepare to be copied, it’s a great recognition.  Never give up control until you sell the business and remember, if you don’t smile on a regular basis then recalibrate, because business has to be fun!

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Maintaining Resilience as a Business Owner

You can divide business owners of the world into two groups: those who have had a serious setback and those who are about to have one!

How resilient are you? – was the topic discussed at a recent meeting of the Business Exposure Group.

As a business owner you need to live higher up the resilience scale than the average person, with the ability to adapt to stress and adversity.  Resilience is one of the key things needed to build a healthy and successful business.

The following points were made at the meeting –

  • Focus on what’s in your control
  • Understand and accept the situation
  • Become more creative
  • Learn from the opportunity
  • Solve rather than avoid problems
  • Step outside your comfort zone
  • Build a support network
  • Regulate your emotions
  • Persist rather than give up
  • Look after your workforce

When times are tough sharing your struggles with colleagues can help.  A support team is vital and often sharing can put things into perspective.  But many business owners keep far too much to themselves.

How quickly can your business recover from setbacks in the sales process – don’t look at the sales record as just one good or bad deal or a good or bad week.  Learn from your failures, is your pitch right, did you contact the right people, etc.

Eliminate the things from your business schedule that drain your energy.  Create daily rituals that don’t let you nose dive.  One suggestion was to look at businesses that are a little bit ahead of you – ‘walk a mile in their shoes’, and take inspiration from their approach.  See every challenge as an opportunity for you to expand.

Resilience in business could be called a new style of crisis management.  Resilience makes you more thoughtful about growing the business and as your business matures a cool almost pessimistic reality is needed to be resilient.  Clearly you have to be confident saying no.

Stand by your business vision even though there are lots of external influences.  Embrace difficult conversations with customers/suppliers/colleagues, and don’t take on a victim mentality.  The most resilient of us demonstrate on a daily basis – stability.  We need to keep confident and be a strong stable rock in the business.

After cash flow issues, research shows that 75% of SME owners believe that the biggest drain on their resilience was managing difficult people and office politics.

Most people step into denial as a coping strategy; the key is to develop resilience and stay motivated in the face of constantly increasing work demands.  A back up plan will always be helpful for when things go wrong.

It is important to deal with stress at work, acknowledge and show gratitude to others, don’t expect perfection and only worry about what you can control.  Find a routine and stick to it, delegate and forgive mistakes quickly.

Don’t make a big deal of problems.  Stay focused and maintain your confidence, believe in your yourself and stand by your decisions, and adopt the 5 traits of business resilience

  1. Appreciate business trends
  2. Communicate the vision of the business
  3. Be risk aware even on a small scale
  4. Embrace flexibility within your business
  5. Maintain high working integrity and ethics

Although business appears to be harder these days, without exception, all the members of the groups felt that time away from the day to day minutia of the business was vital for the resilience of the business, and so that work issues do not impair other important areas of your life

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Inside Sales v Outside Sales – Which is right for you?

Companies typically run their sales operations on either model.  Inside sales have sales people report daily to their office and make sales via phone or web.  Outside sales includes reps that travel for more personal face to face meetings.

Which one do you use and why? – This was the question posed to members of the Business Exposure Group at their last meeting.

There are pros and cons for both inside and outside sales.  Should you choose one model or have teams doing both.

A sales rep can only do so many appointments in a day.  Is it about quantity v quality and the size of the sale.

Inside sales teams are centered around low cost products, lower complexity, small scale orders. An inside sales rep makes 7+ more pitches but an outside sales rep converts 40% of prospects.  Inside sales reps close new business 18% of the time and for every one field rep hired, 10 inside reps are hired.

Small business customers can react badly to having to take time out of their day for face to face meetings.  75% of buyers would prefer not to spend time in meetings.  Therefore do inside sales better cater for today’s customers?

Customer acquisition costs money, inside sales teams can bring in new customers for 40%-70% less than a field rep.  If you spend more time in the office you can deal with all the admin of the sales process quickly so you are more efficient, but is it different if you are going for major accounts as the core of your sales commitment.

Is the field rep an outdated sales approach?  Outside sales require far more business intelligence, situational awareness and planning.  Inside sales, whilst equally demanding, requires persistence, research and back end work.

Many of our members thought that their inside sales may be underutilised as traditionally the field rep drove strategy and execution of the account and inside sales reps provided the support function.  But recently has the emphasis of sales changed, particularly with the impact of PPC technology on the buying process.

The sales model that a business adopts is often influenced by the business owners’ perception of which sales model would be the most effective.  Is inside sales telemarketing or something more?  Nowadays inside sales people are highly skilled and knowledgeable.  Yet they get paid a fraction of their higher paid, harder to manage colleagues in outside sales.  The average B2B deal takes an average of 5 decision makers – so inside sales allows the business to touch base more times with email, etc and keep the prospect warm.  No longer is the quarterly call by the sales rep fit for purpose.

In our meeting 80% of business owners said it is easier to take on board new sales people and share best practice with an inside sales team.

But one of the biggest challenges is how do you get the two different sales teams to work together?  The answers from the Group were as follows –

Define the differences / support each other on different size of deals / reward fairly / have a common sales manager / have all-inclusive sales meetings with both teams so that they are not in conflict competing for the same customers.

This discussion left the members of the Business Exposure Group with food for thought as to the future role of their sales operations.

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Converting Prospects – Does your Business spend enough time on this?

How do you provide your buyers with a complete understanding of what you do, what you sell and why your products or services are better than the competition? 

Too many businesses are already generating all the leads and prospects they need but are unwittingly losing up to 90% of opportunities to convert them into sales.

As an aide memoire it is important to consider the following:-

  • The buyer is more intererested in themselves than you.
  • Map your sales process. A step by step process to convert enquiries and leads into sales. Build trust/understand the buyers goals/create certainty that your product meets their needs/ overcome fear of making the wrong decision/officially confirm the sale.
  • There is value in trying to convert old and cold prospects. It may be time to approach another prospect in the target company.
  • Qualify leads so you don’t waste time. If a prospect isn’t ready to buy don’t give them to the sales team. Provide useful mailshots and wait your time.
  • Spend enough time researching the buyer’s needs, then offer the solution to win the sale. It is important to listen and find the solution for the prospect.
  • Offer content and information that educates, regular newsletters are the beginning of the process.
  • Fish where the big fish are, don’t waste time trying to convince people to buy when they are clearly not interested or ready to commit.
  • Establish a no communication deadline to remove redundant prospects from your pipeline.
  • Follow up your initial call a few days later asking questions, eg, have you had a chance to go over the information and make a decision? 80% of all significant sales occur only after a minimum of 5 follow ups. Following up will apply pressure and open up dialogue to discover questions and concerns that the prospect may have.
  • Have a list of scripted answers readily available for every possible objection/query.
  • Remind them that you have a solution that is going to make them more money.
  • Don’t adopt a one size fits all approach, target and segment, focus on the best prospects first.

It’s all very obvious but there is tremendous value in reflecting on the above and evaluating your conversion process.

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Understanding Marketing Costs against Customer Wins

SME’s say marketing is critical to growth, but measuring return on investment (ROI) holds them back.  Has it held you back?

This was the question posed to members at our recent Business Exposure Group meeting.

If ROI is difficult to measure for a marketing activity, then don’t do it, was the view of one member.  Others felt that they did unplanned marketing activities with no certainty of ROI and not included in the marketing budget.  Research shows that businesses that develop and use a marketing plan go on to outperform those that don’t, by an average of 30% and every £1 spent on advertising benefits an SME eight times as much as it would benefit a larger company (Deloitte).

Marketing is important to SME’s but, lack of budget, lack of expertise and time are barriers.  Some of our members see marketing as a cost, not an investment in the future, and only 20% of SME’s believe that increased marketing spend will be their path to growth.

However, those businesses which seem to be flying are marketing led.  They have the marketing budget at the top of their business agenda – if you are not spending you are not gaining customers!

Tracking where the enquiries are coming from is crucial.  It is easier to track ROI from a digital campaign rather than a traditional one.  Always ask an enquirer where and how they found out about your business.  Is your record keeping system good enough to make sense of where to spend your money?  Understanding, ROI is important, but some felt that measuring ROI was futile because most marketing is about creating long term brand recognition.

68% of SME’s say it is difficult to get customers to take action as a result of marketing, questioning how much should be invested.

Consider a ROI formula? ­­­­___ROI ___­­­_  x 100 as a percentage, so you can work out



whether one medium generates 15% and another 50%, then clearly you know where to invest your money.  When you spend £1 on marketing how much should you expect in return?  A good return thought by the members was in the region of 5/1.

If a marketing activity can’t be measured perfectly, it doesn’t mean it shouldn’t be considered, but don’t throw money across the whole marketing mix without deciding quickly what works and what doesn’t.

All the members concluded that they needed to spend more time on the question of ROI when glibly doing ‘appropriate’ marketing.


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What is included in the ideal monthly Management Pack?

This was the topic discussed by our members at a recent meeting of the Business Exposure Group.

As a business you need to know how you are performing.  Should the management pack consist of a one page summary, or should it be more extensive, and what should be included in it?

Most businesses include KPI’s/ Action plan and corrective action/ Profit and Loss showing period against the budget/ Aged Debtors/ Staff headcount/ Cash at bank/ Capital expenditure / Cash Flow forecast.

These are all essential pieces of information needed to enable you to get an overall picture of what is happening in your business at this particular moment.

The figures should be monitored on a regular monthly basis, say 5 days from the month end, with time set aside in the diary to study them and ask questions.  This is the best way to monitor your working capital and decide whether you need to invest more time in chasing payments.  Armed with the information you can get the business to perform better – control costs/ improve margins/ boost cashflow/ reduce risk through better management.

Management accounts are used to help plan and control activities of the business and to assist in decision making.  Information should be shared with staff members, as it will help them understand where to focus their energy and avoid big surprises at the end of the year.  Often visual graphs make the figures easier to understand, and can highlight both positive and negative trends.

Information can be obtained to identify seasonal differences, plan dividend payments and other remuneration.

One of our members felt that his management accounts produced figures that were too focussed on the present, but it’s up to you to interpret them and spot trends.  Consider burn rate, ie how long can you last if no more sales were achieved beyond those already known, therefore unnecessary costs must be dumped.

Looking at management accounts should not be seen as an additional administrative burden.  All this information is there to help you decide about – adjustment of stock levels, hiring of extra staff to meet demand, investment in marketing, discounting or discontinuing certain product lines or services.  Nowadays with the common use of Xero accounting software there is no longer a need to wait a full month before knowing the financial position of your business.  The use of accounting software allows companies to produce information on demand.

Our Business Exposure Group members were all aware of the value of regularly reviewing their management accounts and agreed that they were important for the business to progress, but some felt they did not give sufficient attention to the definitive information available.

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