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Where does the buck stop in your organization?

By / April 17, 2018

Although he did not coin the statement, President Harry S. Truman from the state of Missouri is given credit for popularizing the phrase “The Buck Stops Here.” A friend had made it into a sign to rest on the president’s office desk. The saying “the buck stops here” derives from the slang expression “passing the buck” which means passing the responsibility on to someone else.

President Truman wanted to remind anyone visiting his office that it was his philosophy to accept accountability for how our nation was governed and not to pass the blame down the line.

On the opposite side of the sign, by the way, on the side facing the president, were the words: “I’m from Missouri.”

The buck also stops with the CEO of a corporation. CEOs must continuously remind themselves of this fact. Regardless of who did what to whom, the CEOs of the business world must look themselves in the mirror and be willing to accept accountability for the success or the failure of the companies they manage to achieve agreed-upon measurable goals and objectives.

Passing the buck is highly contagious. When CEOs makes it a practice to pass blame to others in the organization, they have—perhaps unknowingly—given permission to every manager and supervisor in the company to do likewise.

We all know what passing the buck sounds like. Here are a few examples:

“We can’t find good people because the only people who are not already working are those who don’t want to work.”

Even though their wage scales are not a great deal more favorable than their competitors, Chick-fil-A is consistently able to recruit and hire customer service personnel who are, from the standpoint of image, enthusiasm and efficiency, a cut above the job classifications of competitors.

“The reason our gross margins are so low is because our competitors use low-ball pricing as a marketing tool.”

My book, “Gross Margin: 26 Factors Affecting Your Bottom Line”, identifies 26 different factors that influence gross margin; price is only one of them.

What action plan have you initiated thus far in 2018 that will better prepare your customer contact personnel to deal with customers who are not pleased with the price you have authorized your salespeople to quote?

There are five key areas of a building supply business that I believe must be managed with measurable performance goals agreed upon between the CEO and the company’s middle managers who are accountable in sales and operations:

  1. Sales
  2. Gross margin
  3. Operating expenses
  4. Inventory
  5. Accounts receivable

 

All CEO’s Want:

  1. Higher sales
  2. Higher gross margins
  3. Lower operating expenses
  4. Higher inventory turnover
  5. Lower A/R average collection days

 

While I agree with President Truman that the buck should stop at the CEO’s desk, wise CEOs will make sure accountability for achieving measurable organizational goals also lies with a manager of the CEO’s choosing.

Achieving sales goals almost invariably lies with the sales manager or whoever is managing the sales force.

Controlling gross margin typically lies with the sales manager and purchasing.

Controlling operating expenses almost always lies with department heads and middle managers.

Accountability for achieving inventory turnover goals typically lies with purchasing and operations managers.

Achieving accounts receivable collection day goals almost always lies with the credit manager.

When measurable accountability is pinpointed to specific managers in addition to the CEO—and a portion of the managers’ compensation is tied to these achieving these results— companies have the highest odds of putting optimal dollars on the bottom line.

Bill Lee

Bill Lee works with owners and managers who are looking for ways to put more money on the bottom line. For more information, you can contact Bill at 864.303.8366 or email him at [email protected]