In a Blue Ocean strategy, a company identifies new customers or untapped markets and offers an innovative product and/or service that will capture that new market allowing the company to lower its costs (not price) as it captures more market. In discussing the premise of a Blue Ocean Strategy with a marketing/advertising executive friend, his comment was Value / Innovation makes sense, but it may be just another way of separating your company’s brand from all the others, i.e., differentiation. In the end, he said, a company’s success is based on its ability to stand out in the eyes (mind) of the consumer.

This conversation led us to ask the following questions for 2012.  We hope you will ask these questions of your business and your employees and customers.

• Does your company have a clear vision of its future?
• Does your company have a clear understanding of the purpose or reason you are in business?
• Does your company have a set of achievable goals for 2012?
• Does your company have a unifying or driving strategy?
• Does your company have a clear business plan to achieve your strategies, goals, and vision?
• Does your company have a budget for 2012?

In our experience, these are questions of leadership and all too often the answer to these basic questions will be “no”.  In essence, a company is going to do what it did last year and the year before that.  Unfortunately, what companies did two years ago was lose money.  For many companies, the last quarter of 2011 ticked up.  Now is the time to engage in some planning:  set goals, develop a budget, create a market and sales plan, and get the ball rolling to get customers thinking about your company. If possible, move in the blue water.

To get started, here are several ideas taken from our Blue Ocean Workshop:

1. Set your revenue and profit goals for 2012.  Budget for growth in 2012.   For example, budget for a 5% gain in revenue and a 5% reduction in cost over 2011.  Achieving these objectives will produce a 9.5% profit.
2. Identify the factors (features or variables) on which you currently compete (see the list of factors).
3. Identify factors on which you do not want to compete.  Eliminate these as factors.
4. Identify factors where your performance should be reduced below industry standards.
5. Identify factors where your performance should be raised above industry standards.
6. What factors (features, products, services, technologies) should be created that are not offered today?
7. Determine the variables that will set you apart and develop tactics to expand on those variables.
8. Develop a plan.
9. Implement your plan:  create momentum by focusing on implementing the set of variables, emphasizing divergence, and tell a compelling story about your company. Start every conversation with “Who we are.”

FACTORS:

Locations

Awareness /Marketing

Sales Coverage

Relationships

Reputation

Expertise

Office decor

Accuracy (claims)

Complexity (Commercial)

Full Services (National Business, REIT, REO, Short Sale, etc.)

Product turnaround

Technology

Price

Lowest Cost

Other __________

If you haven’t done so already, get your management and/or executive team together and start planning.

If you need help give CBA a call.

Portions of this Blog are taken from Chapter 3 of Finding the Right Path

Recently we announced our new book, Finding The Right Path:  A guide to leading and managing a title insurance company. 

The book was written exclusively for title insurance professionals.  We envisioned owners and managers using the book as a guide for issues faced by every manager.  To assist in using the book, we included a set of study guides: Take Away Activities and Guiding Principles at the end of each chapter.

The Take Away Activities and Guiding Principles are designed to help managers think about what can be done to improve their companies. In fact, we encourage a company’s entire management team to read a chapter in the book and then stop and use the Take Away Activities and Guiding Principles for discussion and action planning before working on to the next chapter.

Throughout 2012 in our “Tip of the Month,” we will highlight one idea or activity from our study guides at the end of each chapter.  To get us started, we are highlighting the first chapter in the book, Finding The Right Path.

Acting as a leader, manager and team member in a title company can be confusing.  In fact, sometimes leaders and managers in title companies must clean up at night and turn off the lights. Perhaps the job of leader is most confusing because we do not need to lead every day but when we do need to lead, acting like a manager or employee will not do. One way to reduce this confusion is to be clear about what is expected in each role. Here is a list of expectations we use for leaders:

• Provide direction.
• Establish values and vision.
• Set goals and standards.
• Look out for employees.
• Inspire and motivate.
• Solve problems.
• Promote innovation and change.
• Keep the company informed.
• Promote the company with customers and the community.
• Ensure the financial stability of the company.

Now consider what we expect of managers, our expectations are markedly different. The primary job of the manager is to create stability in the work environment.  We expect managers to organize and manage the way the work is performed.  We expect managers to ensure that:

• The work is timely.
• The work is complete.
• We are productive as a team.
• We meet our goals.
• We have cooperation between units.
• We are improving.

Naturally, there are times when leaders and managers must take off their respective leader/manager hat and become another team member, examining files, closing deals, or acting as a sales person.

Confusion often comes into play because the situation calls for us to assume a different role and we do not change roles and take on different responsibilities when the situation demands it.  For example, the manager who acts as a title examiner when the department needs management or the owner who acts like a sales person instead of leading the company.  In title companies, we can eliminate some of the confusion leaders, managers and employees have about roles and responsibilities by understanding whether leadership, management or teamwork is needed in certain situations.

Here is one of the “Take Away Activities” from chapter one in Finding The Right Path:  Examine the list of tasks, issues and problems and identify whether the situation calls for leadership, management, or teamwork:

[L / M / T] A competitor is offering a new service.

[L / M / T] An employee is under producing.

[L / M / T]An employee is drinking at lunch.

[L / M / T]Escrow losses are up.

[L / M / T]The budget is overdue.

[L / M / T]Employee reviews are overdue.

[L / M / T] A manager is criticizing customers.

[L / M / T] An employee is having trouble at home.

[L / M / T]Calling a customer to address a complaint.

[L / M / T] A sales person is over promising to a customer.

[L / M / T] A closer is accepting gifts from a customer.

[L / M / T]The reason for a new computer system is explained.

[L / M / T]Employees need to be held accountable for policies.

[L / M / T] Setting a new dress code.

[L / M / T] Targeting new customers.

[L / M / T] New Employee training.

[L / M / T] Implementing a new computer system.

In the upcoming Tips of the Month, we will explore more “Take Away Activities” and “Guiding Principles” from Finding The Right Path.  In the meantime, you can find more information about Finding the Right Path by going to our website at www.cbaltd.biz  or by clicking   www.iiwiipress.com.

We have been following a recent thread on LinkedIn regarding the Performance Review Process.  The provocative question asked in the Organization Development and Training Forum was whether the Performance Review Process has become obsolete?  Several group members agreed the process should be eliminated observing that most managers’ hate doing reviews, they can be ineffective, and there are other more effective processes that can be used in place of a review.

In our new book, Finding The Right Path: A Guide to Leading and Managing A Title Insurance Company we wrote that performance feedback is one of the most important actions a manager can take to improve and develop employee behavior.  Given our rather strong support for performance feedback it is understandable why this provocative thread about Performance Reviews on LinkedIn caught our attention!

In looking at the Performance Review process, we agree that most managers dislike writing and presenting their review.  Even when writing the review is made simpler by review writing applications, the manager still has to sit down (once a year) with the employee to discuss his/her performance.  This process would be easier if done more often, but it is hard enough getting managers to conduct annual reviews.

Fortunately, there are alternative to the annual review.  In our experience, immediate positive feedback is a very powerful way to influence performance.  When a manager observes an employee engaged in behavior that is outstanding, he should immediately say something positive about it to the employee.  As an alternative, the manager could write a note praising the behavior.  The note can then be placed in the employees file at the same time it is passed up to the owner or more senior manager.

We encourage managers to find employee behavior to praise and reinforce daily. One of the simple techniques we really like is what we call “The Morning Walk-Around.”  This technique calls for the manager, early each morning, to take a few minutes to walk around the office and meet and greet employees. The Walk Around is a great opportunity for managers to encourage and praise employee behavior and provide constructive feedback if needed.  The Walk Around also is a great time to practice another process we advocate highly “Catch Them Being Good!”

We also advocate these means to provide performance feedback:

• Use your “Morning Huddle” and weekly and monthly staff meetings, to provide feedback to your team or office and to call out outstanding performance by individual employees.
• Write short (monthly) and longer term (quarterly) goals and objectives for employees and teams, review progress frequently and provide feedback at least quarterly.
• Use electronic communications to communicate and provide feedback to employees (e.g., e-mail; text messages; company blogs).
• Develop and implement an employee performance scorecard.
• Use performance reports and measures like average closings completed per week or month; average commitments produced; or average policies typed, to provide feedback to individual employees.
• Meet with your employees in individual meetings frequently, especially when there are performance problems or issues that need immediate attention, or when you need to act on a proactive basis to get ahead of a potential performance problem or issue.
• Have your team self-assess their overall team performance at a team meeting.

But what about Performance Reviews? What do we think about them? Are they obsolete?  We know many managers do not do them well, they take manager time, and managers complain about them.  So should they be eliminated?  In a word, NO.  Wanting to know how you are doing at work, at home, or in life is a critical aspect of being human.  People want feedback.  They need and benefit from a constructive review.

Performance Reviews represent a time when an employee gets to sit down with his\her supervisor in a dedicated formal meeting, to discuss their overall performance for the year. It is a time to reflect on and discuss strengths and weaknesses, gain employee input and their self-assessment of their performance, review individual goals and set new ones, and renew performance expectations and commitments for the year.  In effect, the Performance Review Process should renew or set a new direction for the employee for the coming year. It also produces a written or electronic document that can be used to measure and assess progress.

We support having a formal review process.  However, if you asked us should most performance review processes used by companies be thrown out and replaced, we would completely agree.  We think every performance review system can be improved, made more efficient, and more user-friendly. How can Performance Reviews be improved?  Many title companies have not yet migrated to one of the several very good on-line performance review systems that are commercially available today.  These systems can be customized to fit the needs of individual companies and they contain many features that make the process easier and efficient for the users.

Performance reviews would be easier if they were a regular part of a company’s business schedule.  Reviews need to become an event on which employees can count. Too often we hear of companies that simply post-pone or put off scheduling reviews, often times missing them all together. Worse yet are the companies who schedule them in a hurried fashion at the end of the year and who rush to get them over with, with too little time to prepare adequately.

Perhaps the easiest way to improve the review process is to train managers in the process.  Most managers are not trained how to effectively write reviews, how to integrate performance data from other sources, how to conduct a successful review meeting with the employee, or use the review process for managing performance throughout the year.

When we interview employees and ask how a company needs to improve, an answer we overwhelming get is employees want feedback on how they are doing. Simply stated, employees need and want performance feedback. We recommend that managers use several means to provide employee feedback on a frequent and ongoing process throughout the year and that one of the feedback tools in the managers tool kit should be the Performance Review.

If you would like more information on any of the performance feedback procedures we have mentioned or if you need to improve or overhaul your performance review process and need some help, please contact us at Corporate Behavior Analysts, Ltd.

Finally, we are pleased to announce that our new book, Finding The Right Path: A Guide To Leading and Managing A Title Insurance Company  is now available.  To order a copy click on the ORDER TODAY link.

To read excerpts or obtain a press kit for the book go to our publisher,  It Is What It Is press.com

Here is a summary of the points in the video:

1. Prepare the agenda ahead.
2. Prepare people for the meeting before hand.  Publish the agenda, date, time of the meeting ahead of time.
3. Everyone has a part.  Make sure everyone has a role in the meeting  or is prepared to contribute.
4. Arrive early – be prepared, set everything up:  computer, projector, handouts, snacks, etc.,
5. Start on time.
6. Include an ice breaker.
7. Review meeting rules
8. Everyone on the team has the opportunity to speak.
9. Team members are direct and honest.
10. Team members do not hold back.
11. Team members ask questions.
12. Team members listen to each other.
13. Team members are constructively critical.
14. Team members are open to the ideas of others.
15. The team stays on task and is focused.
16. Team members support of each other.
17. The group acts as a team.
18. Allow discussion items to be bucketed.
19. Stay on agenda.
20. Stay on time.
21. Finish on time.
22. Make sure everything was covered or moved to next meeting.
23. Review assignments for the next meeting.
24. Select a date and time for the next meeting.
25. Publish notes.
26. Evaluate meeting.
27. End with a hug.

In the video, we mention the ice breaker, the Human Knot.  Here is a link to instructions for the Human Knot

http://wilderdom.com/games/descriptions/HumanKnot.html

 For the last twenty years, we have spent considerable time examining title departments and redesigning title operations in an effort to improve commitment turn-around time.  In hind sight it was undoubtedly a mistake to convince a Realtor that he or she wanted a commitment in three days and it was an even bigger mistake delivering some commitments early.  Today because of automated processes, some commitments can be ‘print on demand,’ but perhaps 50% or more require the typical three to seven days in the system.

In our experience, most Title Department Managers will have created some form of paper or electronic system for tracking orders.  Often times this is in addition to the system created in their operating platform.  Creating duplicate systems is never a good idea, but sometimes it is practical because the system that comes with the software does not measure what you need, or even if it does it is hard to use and underutilized.  If you find yourself in this situation our recommendation is to map out the system you have and map out what you want and then find some programmer who can create the system you need for as little money as possible.  

Tip # 1:     Use one electronic system to measure and track orders.  The system must be accessible to everyone (public), and it must generate on demand reports.

In the systems we design, we measure overall turn time on each order and we track the status of the order as it moves through the system.  Very intentionally, this information is made public within the management team.  This way, who has the file and how long the file is worked on or waits can be viewed.  In addition, we create a weekly or monthly report that summarizes the team’s performance.  If possible we start by time stamping the order on arrival and we record the completeness of the order.  For example if it takes three out of four pieces of information to correctly search a property (e.g., property address, owners names, tax number, and brief legal description) we start by measuring how many orders have sufficient information to start.  In some companies when information was incomplete it was sent back.  At the very least, this information is critical in evaluating the time it takes to turn out a file and it provides feedback for the sales staff and escrow officers.

Once the order is in the system, we measure how long the order takes at each step and how long it sits between steps.  In redesigning work, we have learned that the time an order sits is often the cause of high turn-around times.  For example, when a file takes five or ten days to go through examination, we might assume it took a long time to exam.  Often we found that an experienced title examiner can get a file off his/her desk very quickly, meaning the problem is not one of difficulty. Rather the file sits in a stack or an electronic que, waiting to be examined for several days.

In most Title Department, files are organized (stacked) by the date the file was searched or opened, rather than need by date.  In redesigning your Title Department, consider designing your online order system where the customer has to enter certain critical pieces of information (e.g., name and property address) and indicate both the closing date and a need-by-date on the order form.  Then design the system so that the order will only be accepted if the need-by-date meets the title company’s guidelines.  For example, a lot and block residential order with a due date five days in the future.     In such a system, by accepting an order you are telling the customer when you will deliver the commitment and you are preventing the customer from defining all orders as rushes.

Tip # 2:     Create system where turn time is based on need by date and red flags are created to never allow a file to go beyond that date.

In measuring turn-around time, we have found that average turn-around is not the correct measure of performance, because one or two files have very long turn time (i.e., weeks or months).  We prefer median turn-around time and we like to measure the percent of orders completed in 1, 3, 5, 7, and 10 days.  By looking at the distribution of orders and the percent of orders that are over 10 days we were able to take actions to significantly reduce the median turn-around time.

In redesigning the work flow in title departments, we have found that triaging the order up front and sorting the orders into different work flows greatly improved the overall distribution of order turn-around time.  For example when we created different work flows for commercial, residential without a prior, residential orders with a prior, and refinance orders we have saved days of waiting.   

One of our greatest disappointments is that we have yet to see a ‘new customer’ work flow in a title department.  In most title departments, an order is an order, yet every owner and every sales person knows this is not true.  A first order from a new customer might have taken months of sales calls to generate, so why is it thrown in with all the others?  Why isn’t it sorted out and treated special?  The answer is ‘no system’ and a lack of effective communication.  In a system where every order is a ‘rush’ and every order is important, no orders are important.

Tip # 3:     Create a process (system or team) to expedite new customers, VIP customers, and special orders.

 Other industries have created systems to deliver a product when it is needed and wanted.  The Title Industry is overdue.

Accomplishing any long-term goal (significant change) requires that the company is sound in the short-term, meaning both financially sound and operationally sound.

In the lifeboat example, if there are holes in the boat and the boat is taking on water we may not have the time to reach our goal.

Measures of financial health begin with a company’s balance sheet, monthly profit and loss statements, measures of revenue, cash flow, expense, and various ratios.  Collectively we call these measures a company’s financial dashboard, and we seek to have all of the measures in the black.  Unfortunately, many real estate related businesses operate in the red for four to six months because the owners are convinced the business of selling homes in some markets has a cycle.  What is important to remember is that as an owner, either you control the cycle or the cycle controls you.  Companies that staffed up for the busy months but never staffed down for the slow months are being controlled by the cycle.

In our experience a sound business is staffed for a profit through the entire year.    Likewise, if a company is unsound financially, losing revenue or unprofitable for more than 30% of the year it will be hard to achieve any significant long-term goals.  Similarly, if a company’s management system or operating system (infrastructure and technology) are not working, it will be difficult to bring about a fundamental change and it will be impossible to sell the company to a knowledgeable buyer. Therefore, before we start rowing towards a new tomorrow, we need to consider the financial and operational health (soundness) of our company.

This week we examine Financial Health.

As we said, the health of a company can be measured by its balance sheet, and its monthly orders, closings, revenue, expense, profit, and profit margin.  In addition, the health of a company can be expressed by how much profit it turned back into growing the business and how much growth or return on investment the company experiences.  By these standards a company that earns two million dollars a year is more successful than a company that earns one million, however if both companies have a profit of one hundred thousand dollars, then we have to consider that the second company (with a 10% profit margin) is healthier.  Successful companies show a pattern of steady revenue and profit growth with a stable profit margin.  For example a healthy company might be expected to grow 5% to 30% in revenue each year with a stable profit margin.   Unhealthy companies are those with falling revenue or with declining profits and profit margins.

Unfortunately, many companies in the last four years experienced dramatic decreases in revenue, followed by a weak or no recovery compounded by unpredictable revenue cycles.  In title companies, for example, the percentage of swing in a “normal” year can be as much as thirty percent in any quarter.   Consider for example the revenue for the  company presented in Figure 1.  This company averaging $20,000 in revenue per month, but the revenue ranges from $14,000 (70%) in January to $26,000 (130%) in July.  In Figure 1, we show revenue each month for one year.  When a company experiences swings like this, it easy to overlook improvements and ignore warning signals.  Consider the same company in a second year.  In order to decide how a company like the one in our example is doing, we have to compare the company against prior years.

Figure 1

Figure 2

In this example, the difference in the first quarter in Year Two compared to Year One is only $2,000.  However the difference by the second quarter is an increase of $10,000 and $20,000 by the third quarter.  In total the second year shows a 20% increase in revenue, which is very healthy, but without some measure of change it might be easy to ignore what is happening at least through June.

A second way to look at this two-year comparison is to consider the percentage of difference on a measure as compared to the average for a prior period.  In this example, we see in the first year revenue varies by no more than 30% around an average of $20,000.  In the second year in the month of May revenue is up 135%, over the prior year average, and June is 140% of the Year 1 average and July is over 150%.

Clearly, in this example revenue is varying (increasing) more than history predicts.  Thus we can conclude we have real pattern of change (growth).

Creating a Financial Dashboard to measure, track, and project your company’s health begins with what you measure already.

In a title company for example the basic dashboard measures begin with:

1. Orders
2. Closings
3. Employees (headcount or FTE)
4. Revenue
5. Underwriting / cost of transaction expenses
6. Sales expense
7. Labor expense
8. All other expense
9. Profit

From these measures we can calculate several important ratios:

1. Profit Ratio =  Profit / Revenue
2. Labor Ratio = Labor expense / Revenue
3. Capture Ratio = closed orders / open orders
4. Income per order = revenue / orders
5. Income per closing = closings / order

At CBA we track these measures using a spreadsheet and we plot all the measures individually and against one another.

In assessing your resources, there are several levels of assessment possible.  At a basic level of assessment, you might simply list everything you have in the company and categorize each item as either a strength or weakness. This basic list of assets and liabilities can be compared against a list of basic features (products and services) required in any business and those things specifically required in a title company.  The purpose of such an assessment is to determine whether you have all the basics in place.  In the life boat for example, we find that we have a rudder, oars, water, a map, and a mast and sail. Unfortunately we lack food, a bailing bucket, and a medical kit. In our lifeboat, we have adequate assets for navigation, but if we are going to be in the boat for days, we will have to find a way to bail water, fish, and care for the injured.

Now let’s look at an example of a full service title company.  As to assets, we list the following: a reliable source of title information, an efficient production / communication system, a competent search / examiner, and a competent closer. As to liabilities we find that we need a commercial examiner, we need an escrow assistant, and we lack a sales person. Given the company’s strengths and weaknesses, we know the company can promote its competencies, but without a sales person its coverage will be a question and without a commercial examiner, its ability to attract high revenue orders will be diminished.

STRENGTHS AND WEAKNESSES

Your company’s list of strengths compared to your weaknesses provides a guide as to strengths to market and areas in need of improvement.

Your company’s list of strengths and weaknesses also can be compared against a competitor or against the market as a whole.

Where a competitor is strong we call that aspect a threat.  Where a competitor is weak we say we have an opportunity.

Comparing your company’s strengths and weaknesses against a competitor or the market is called a SWOT analysis for strengths weaknesses, opportunities, and threats.

In a SWOT analysis, if you are strong and a competitor weak you have a potential advantage.

SWOT ANALYSIS

Where you are weak and a competitor is strong, you face a potential threat and have a disadvantage.

Determining your actual advantages and disadvantages can only be made when you know where you are headed.

For example if you are in the lifeboat and you are in sight of an island, you are better off rowing and forget putting up the sail.

On the other hand, if you have to travel ten miles or one hundred, you better put the sail up.

In the same way, you may have a sales person who can cover the basics, but if that person is also great at commercial sales, then you have a resource that gives you an advantage provided you plan to expand into the commercial market and your competitors are weak in commercial.

To get us started on our management SWOT assessment, here is a list 20 questions designed to assess your strengths and weaknesses with respect to management:

1. What is your management structure and management processes?
2. How many managers do you have?
3. What functions/units have a manager? What functions /units lack a manager?
4. What are each manager’s level of authority and responsibilities.
5.  What is the span of control for each manager (number of employees)
6. Are there employees who are called managers or executives but they manage no one or one person?
7. Who are the strongest managers?
8. Who are the weakest managers?  What do they lack?
9. Do you have regular and effective management meetings?
10. Do you have regular written management reports?
11. Do you have clear lines of authority?
12. Do you have a published organizational chart that everyone understands?
13. Are managers able to make independent decisions, and do they?
14. What is the level of team work across managers and departments?
15. Do you have any processes in place to develop your managers?
16. Are the expectations for each manager clear?
17. Does your company have performance standards?
18. What is the status of your Human Service systems for employee reviews?
19. What is the status of your Human Service systems for manager reviews?
20. Does your compensation system motivate and reward the right performance?

In this Tip of the Week, we examined assessment questions that will assist a company in evaluating its management strength and weaknesses as compared against the markets’ opportunities and threats.

In the next installment, we will examine how to assess other operational areas of a company.

We are often asked by title company owners to help with some ”management problem” the company is having.  Typically, we sit down with the owner, and before we ever talk about managers and management, we ask “Where is your title company headed?” (i.e., what is your direction and what are your goals)?  Next we ask, “What resources do you have to achieve your goals?” Frequently, the owner, who is busy and impatient, and already has a solution in mind, says: “Why are you asking me those questions?”

Our answer is: “In a lifeboat, the first thing you do is assess your resources, the second thing is set a course, and the last thing you do is row.”

Discovering and planning effective leadership and management solutions takes careful analysis before you implement (test) a potential solution.

In our experience, here are ten questions you should consider in determining where your company is headed:

1. What are the overall goals of your company?
2. What will the company look like in three years from now? Five years?
3. What vision do you have for the company?
4. What are the company’s strengths?
5. What are the company’s weaknesses?
6. What opportunities do you see for your company?
7. What barriers to success or threats do you see for your company?
8. What written expectations are (have been) communicated to your managers?
9. How do you evaluate the performance of your managers?
10. How do you evaluate the performance of your company as a whole?

In our next installment of Tip of The Week, we will explore Assessing Your Resources.

Each week we will discuss one of the basic truths of management.

This week we are examining setting priorities.

The weekly tip will be posted on this CBABLOG, and on

our web site:  http://www.cbaltd.biz/Tips.html

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Here is the Tip for the Week

Download the presentation slides
Handout

In the next weeks, listen to the audio of the presentation on the ALTA web site:
Audio