Limited resources and optimal resource allocation are probably the two sides of a coin that most often dominate the thinking of business leaders. Because as a leader, the primary responsibility is to shepherd and manage the resources of the business in order to produce optimal results.
In this context, business leaders would do well to learn their ABC’s. More specifically, identify A customers, B customers and C customers, and identify A employees, B employees and C employees. Your customers and your employees are your two most important assets. Managing them well is a top priority.
“A” customers are the 20 percent that deliver 80 percent of the revenue. If a business does not fit this pattern in some reasonable proximity to the 80/20 Rule, then they are the exception to the rule. Know your best customers, nurture them, and look for more of them.
Where To Grow
“B” customers are the vast middle land where the customer delivers revenue, but not a lot. They are profitable, but maybe not too profitable. Their ability to grow is a question. Leadership should, as a second priority to finding more A customers, identify B customers who could become top tier customers. They should also identify the B customers who will never be top tier customers. Work to migrate the good candidates to A status. Find less expensive means to work with good B customers who will never become A customers. Use technology or alternative distribution channels to connect with these customers.
“C” customers are the ones who are marginally profitable, and do not align well with the direction and future focus of the business. As painful as this may sound, fire those customers. If you are required to drive optimal returns on the assets of the business, spending precious resources on marginal to losing customers is not a good practice. Be fair, be helpful, and be generous when ending a customer relationship. You don’t want to create dissatisfaction. You just want to focus on the customers that are your future.
Internal Resources
Employees are not all that different from customers. You have your A performers, B performers and C performers. The highest performing organizations have the best people. The highest performing leaders hire only the best people.
Take time to identify what the characteristics of an A performer are in the context of your organization. Then evaluate your current staff. Start at the top, and for any non-A performers, take action. This could be training and development to enhance their skills and ability to be an A performer, reassignment to a position where they can excel, or dismissal. The goal is to have a team of A performers, and taking action is the clear responsibility of leadership in this regard.
When building your team, hire only A performers. Don’t settle for second best or a “good but not great” fit. If you do hire non-A performers, you spend too much time micro-managing, they don’t perform up to top expectations, and both parties are dissatisfied.
Work with B and C performers currently on staff to find positions where they could be A performers, and then help them achieve that level. Discuss with them why they are not performing in current jobs, and work with them on a plan to move ahead, even if it is a different position.
Finally, A — Always focus on assembling a base of A customers and building a team of A performers. B — Be diligent in doing this. It is the most important responsibility of a business leader. C — Care for the individuals involved, be they customers or employees. None are commodities, and the relationships with them are long term and they need to remain positive.
Ken Cook is managing director of Peer to Peer Advisors, an organization that facilitates business leaders helping each other. You can reach him at kcook@peertopeeradvisors.com.
