Chris LoCurto: How you can make stronger strategic decisions in business. That is coming up next.
Welcome to the Chris LoCurto show where we discuss leadership and life and discover that business is what you do, not who you are.
Welcome to the show folks. we are about to dive into a topic that has serious implications for your bottom line, your team’s productivity and your ROI in business. And today’s episode, you’re going to learn about how to make stronger decisions, how to make quality decisions based on the current landscape of your business.
One of the things that we help people see all the time is how they make decisions. And in the early days people would come in and go, oh well we already know how we do that and then a day later they’re like, we had absolutely no clue. We had no clue how much fear was guiding our decision making process. We had no clue how much pride was guiding our decision making process. We had no clue how much we were trying to make this person happy or not make this person upset or whatever or how the decisions we were making were not based on growth.
Those are just a couple of examples of things that people don’t realize are happening in their strategic decision making. So the thing you need to know is that strategic decision making is learned and taught. You’re not born knowing how to gain high quality perspective or make excellent strategic decisions. So depending on the leadership you’ve had, you may even have some bad information on decision making. So we’re going to talk about that kind of stuff today to help you to get to making better decisions. So, today’s episode is brought to you by the next level leadership event. Folks, lacking strong decision making can be a big piece of what holds your business back, what’s standing in the way of you and your business goals? Maybe it’s the overwhelm that you experience everyday.
Maybe it’s the struggles with leading team members. Maybe it’s not getting the right clients in the door. It could be a ton of things. Here’s the thing that we want to do for you. We want to help you solve these frustrations and lead your team to success in 2019. At the Next-Level Leadership LIVE Event you can get the tools to do that in three days. You can get the tools to accomplish your growth goals, to create the culture that you need that produces champions. You can get the information to get you out of the stuff you should not be focusing on as a leader. Listen, there are so many things that you’re focusing on as a leader that you should not be doing. You need to kill the leadership crazy cycle number one lesson that we push into our clients here to get them freed from that so they can make huge changes in their business.
You can get this information on how to do this and change the way you do business at the Next-Level Leadership LIVE Event. Here’s just some of the transformations our clients have seen 8,169 net profit increase in one year. That’s just from the next level mastermind clients. That’s just from the clients that have gone through that process. Collectively over 8000% increase in one year’s time. Leaders that are shifting and learning how to kill the leadership crazy cycle that are getting 30 hours a week back to lead their people to success and having the tools to do it successfully, not just sitting there twiddling their thumbs going, well, what do I do now? Actually leading people to grow their business, 46% gross profit increase in one year, 25% team productivity increase in eight months. These are the things that our clients are experiencing. Guys, you can have the same stuff, so registration is open now.
Go to ChrisLoCurto.com/events and get your tail to this event to get the results you want in your leadership and business. Now how to make stronger strategic decisions in business. I had a next level mastermind call with a client recently where he was seeing the effects of poor decision making in his business. Now they’re a pretty large company. They’re in the engineering space with thousands of employees. But what we’re going to talk about today happens across all industries and in all businesses.
So here’s what was going on inside of their business. Their leadership and their team were overwhelmed with the amount of workload coming in. I mean, it was a lot. Another thing is they had the money, plenty of money to build, to buy and to grow, but they only have so many team members and they are paid by the hour.
So just kind of get this idea of what this looks like inside of this company. So what do you do when you have more work than you have people? Here’s what one of the leaders in the business said, if we keep getting more business, we can throw more overtime to employees and make it work. So now I’m not going to give the exact numbers, but here’s what happened.
Thousands of hours of overtime across multiple departments. So think about this. This is a very big company. They spent thousands of hours in overtime, not just one area, but many. The team members were working like crazy, tons of overtime every single week. So one of the leaders inside of that business, one of our clients came to me and said, help me to understand, do you think this is smart? My first question was, are these just team members who are passionate about what they do and loving the opportunity to work overtime?
The other question I had is this team or these teams, because it was actually in multiple departments, are they being overworked? How do you know?
The other questions I asked, can you scale this process of allocating work to overtime and have healthy growth in profitability?
Next question. Is Utilizing current team member over time saving them money or is it costs?The next thing is it a smart overall financial decision? So how do you decide the best actions to take and the best strategy? What is the process for strong decision making for this and other scenarios? I’m gonna walk you through the questions. The leader in the scenario needs to ask to get the answers and the perspective.
So let’s walk through this scenario. What I want you to see though, through this example, this mini case study is the power of strong quality decision making. So here are the five questions to gain perspective needed to make the right decision in this scenario. So the first thing, are we doing everything with excellence, the, you know, thinking through the productivity, thinking through the finances. So you’ve got to evaluate the effectiveness. Are there productivity mistakes happening? In this question, yes, there were. Why were they happening? Well, a result that you’ve probably already jumped to. Why were mistakes all of a sudden happening in this situation, we have thousands of hours of overtime.
We have people that are making more money than they’ve ever made. We’re putting out a whole lot of money into these team members. We’re paying them time and a half, maybe double, maybe even more than that. Why are we having productivity mistakes? What’s the answer? Well, his answer was because people are being too tired. People are working incredible amounts of hours as they get toward the end of their day. They’re not as effective as they were at the beginning. If they’re coming in tired the next morning, they’re not as effective than if they came in and they didn’t work 14 hours the day before. Right? So the money side of this isn’t actually solving the mistake problem. We’re paying people more money to work, more hours to be more tired and they’re making mistakes. So the question that I ask is, are we measuring how long things should take?
How long should it take to do the very thing that we’re producing? Right? And what we find out is it’s actually taking longer because of the overtime to produce the very things that we’re making. If we only paid people a regular day and they had a good, you know, came in, worked as hard as they could, but weren’t overworked then an amazing thing happened. They were able to produce more stuff. They were able to get things done in a shorter period of time. There are studies now I do not agree with what some of the ending results were with some of these studies on what their suggestions were. But there are a lot of studies that were done in Europe back in the days that showed that the longer time somebody has to work, the less they will get done because they know they’re going to be there for 10 hours, 12 hours, 14 hours.
It’s the very same thing we see with leaders. We know that a lot of leaders, if they are already set in their mind that they are going to work today for 12 hours, that they’re there. They know they’re coming in at seven and leaving at seven or whatever the thing is that they just know that they’re there for 12 hours. Then getting things done doesn’t have as great of a priority in a timeframe. That’s one of the things that we push people to do is to actually break things up in priority and timeframes so that they can knock stuff out. We have tons of folks in next level mastermind that are like, I have accomplished more in three months than I do in most years because of the way we set that stuff up. So the question you have to ask is if people are actually doing less with more hours, why?
What’s the problem here? How do we solve this? Are we doing everything with excellence? Well, of course not because we’re not producing the same amount. We’re actually paying more money for team members to do less work. So if I pay them, oh I don’t know, $15 an hour, $20 an hour to do their job on an eight hour day. If I’m paying them 20 bucks an hour and now I’m paying them $30 an hour and they’re actually getting less stuff done and having mistakes, what’s our effectiveness? Is this a smart decision? So you have to ask yourself, are we doing everything with excellence? Take a look at your productivity, take a look at your finances and evaluate that effectiveness. Number two, what is the productivity? Are we looking at the actual productivity or are we just doing so much stuff that it seems as though we have kicked up our productivity?
When you measure it, what are you discovering and d team members want the overtime and the double time? So you know, for the people who don’t really want the overtime but feel like they have to do it or it’s being pushed on them, now we’re losing our effectiveness because we have a tired person trying to do work and they don’t even want to be there. What’s their productivity when somebody doesn’t want to be there longer? You know, if somebody comes in and you know, when you have thousands of people that are paid hourly, is there the possibility you have some folks that are just there for a job? Yes, of course. Absolutely. So is pushing them to work more hours smart? What does our productivity look like? Are you measuring that against that person? What’s their effective rate? For the people who do want over time, there’s going to be those folks.
There’s folks that want more money. They don’t have a problem working more. What is their effectiveness? So taking a look at their productivity, what is it? What’s their effectiveness? They may be thinking, you know, I can still come in to do, you know, for extra hours at night and, uh, you know, with half my productivity, if you’re gonna pay me twice the amount, because the money’s really exciting, you know, you get, they’re going to give you 100% of themselves. Let’s just assume that they do for $10 an hour for eight hours a day and then they’re going to give you 50% when they’ve gotten too tired, but you’re still paying them now $15 an hour, $20 an hour, so just do the math. You may have people that absolutely want the overtime because they want that money. Is that smart for your business? What’s productivity look like?
You know? If this made sense, then big companies, Chrysler, GM, Mercedes, they would all be doing this, right? If it made sense, then you would have these huge, massive companies doing it, but they don’t. There’s a reason that they have three shifts. You know that they run three different shifts throughout the day because people can only put in so much productivity for what they’re being paid for. It doesn’t mean that their hearts aren’t there. We work beyond 40 hours many times here. There’s some team members, they worked 40 hours, they go home. There’s some team members that stay and work a little bit further and put more into it. Why are they doing it? They’re doing it out of passion. They’re not slowing down their productivity, right? Because it’s a, I want to do this thing as opposed to a, oh, you’re going to give me more money?
Well then I guess I can stay and do less productivity. The third thing, what is the productivity or the profit per piece? This is another way for you to measure is this decision smart? So look at what it takes to create the widget. Whatever the widget is, you know what goes into it, how much profit margin is in that specific piece? How much time does it take when you, you know, when somebody is busting it to make that keyboard or whatever, how many keyboards did they get when they’re done working eight hours compared to 12? so we’re still looking at a lot of the, how are we making this decision, but breaking it down into pieces to find out, is the decision strong? Is it smart? Is it a great strategic decision? So you know, are they working 150% more if they stay to create more keyboards?
So if they do, I don’t know, 12 keyboards in eight hours, what are they doing in 12 hours? Have they kicked it up? If not, you’re now paying 150%. So let’s just say in eight hours they do 12 keyboards and then they work 4 more hours and in that four more hours, they stay at the rate that they’re doing and do six more. Now you have just paid 150% labor for the same keyboards. Think about this folks, if they don’t do nine keyboards in those four hours, you’re now losing per piece and this is not wise. This is not a great financial decision. This is not great financial decision making. You’re now losing money per piece. Another great way to just measure the smartness of your decision. What is the strategic decision costing me? So, so far we’ve looked at three pieces, right? The first thing are we already doing everything with excellence?
Evaluate the effectiveness of what you’re already doing before you ever take a look in this specific situation before they ever took a look at doing overtime, they should have asked the question, how effective are we right now? The second thing, what is the actual productivity? So how are we being effective? What is our productivity? So you actually know what you can measure against. The third thing is what is our profit per piece per service, per whatever it is that the thing that you’re doing. So if we do kick this up, we do make people more tired. We do ask to produce more. We pay more money out. What does that looking like? Is our profit going up or is our profit tanking pretty quickly? In this situation, the profit is tanking, isn’t it? Because now we’re spending 50% more per piece for people to crank out the same things that is if they’re keeping up with what they did during the day.
Well Chris, they probably worked harder after the eight hours. Uh Huh. Sure they did. Oh absolutely. They come in knowing that they’re going to work 12 hours today. They do their normal work that they do every single day in the first eight hours and then they kick it up a notch in the last four. Guys, I’m telling you, studies show most people, if they know that they’re going to work more hours than normal, they slow down their pace. They pace out their day into those hours, so not a smart strategic decision. Number four is there turnover? Are we losing people? In this we discovered, Yup, absolutely. Some folks were getting burnt out. Some folks were just getting tired of it. Some folks felt that the only thing that the business cared about, and I’m not saying this is everybody, this is, but this is something that helps you to make smarter, stronger strategic decisions.
You’re taking in gaining perspective so you don’t have to have a ton of people that you’re having turnover with. Right? But if you are, why? The answer was the same. They didn’t want to continue to feel like they had to work overtime. They didn’t want to feel pressured to work overtime, so they’re losing people. Is that a smart strategic decision? Not at all. Number five what could we do with fresh people? So if we brought in eight new people and all they did was work eight hours, how much more productivity could we get out of these eight people rather than keeping eight people in overtime? So think about it. If you take somebody who’s working eight hours a day and you pay them time and a half or double time for another four hours, you’re already spending extra money on those same people. If you took all of that money above and paid new people to come in, what if you just brought it in six?
How much more work could six people do? So now if you had eight people already and you bring in six people and now we’re up to 14 but we’re paying everybody for eight hours a day, what could the productivity be with fresh people? Folks that are ready to go to work, folks that are ready to produce in the eight hours, folks that you can hold accountable to, what the other people have been able to produce. Again, going back up to number one, what’s our effectiveness? You know, are we actually already being excellent in being effective? Are we producing the max that we can in eight hours? If you can hold these new people to that same accountability, you are now getting more stuff done at less cost. The math just works. Well of course, Chris, everything you’re saying is just so basic. Oh really? How come we make decisions like this in every area of our business?
Because we don’t think through the perspective, we don’t gather the perspective in all these different areas. How do we make stronger decisions? We actually dig in and learn. We discover we don’t put our heads in the sand. We don’t just go, wow, just throw more money on it. That’s gonna make it better. We actually go through and gain a ton of perspective. This is just one scenario. We deal with this stuff all the time. Why? Because most leaders have not been taught how to think strategically. Most leaders have been taught, solve the problem as fast as you can. As we go through next level life one of the things we talked about here is, is that in a western culture, whenever we see our problem, our opportunity, our solution, in a western culture, our thing is go make it happen. Solve it. Right now. In an eastern culture, they will spend time gaining perspective, gathering information, getting as much stuff as they can, looking at it from as many directions as they can before they make their decision.
Why? Because it’s smarter, stronger, strategic decision making. So what do we do on a daily basis? Solve the problem, hey, go get that done. Hey, go fix that. There’s something wrong. Go do it. Instead of pulling back and taking in plenty of great information and asking the questions that we need to be asking so that we can make the best decisions. This is just one area, guys. This is just one scenario and of course the questions are going to be different on most every scenario, right? You’re not going to ask those specific questions when it comes to a cultural issue when it comes to gossip. So getting back to this specific scenario, here’s where we get into the math. Think about this for a second, for 22,000 hours, if we spent 50% more to get the same productivity, if they continued to do the same productivity while they’re working over time, what’s the average over time rate? At 22,000 hours, how much money is that?
So if it is $12 of overtime, that’s $250,000 more than if they actually made a better, stronger decision by gaining a ton of perspective and bringing in fresh people and paying them the same base rate. Well Chris, what about spacial issues? Great. Go to a different shift. Well, you can come up with all kinds of excuses, guys, $250,000 more for the same productivity. And again, when I dug into some of the questions, what we were discovering is they weren’t getting the same productivity. They were getting less productivity with increased mistakes. So $250,000 on 22,000 hours of people was actually hurting them. They were losing money, they were losing team members, they were having to redo stuff and spending money in hard costs for the stuff that they were making because of mistakes. So when we started this episode, I started it by asking what do we do if we have more work than people?
An easy answer is, well, if we have team members that want to work overtime, let’s give them the work. That way we’re utilizing human capital we already have, we’re not training anyone new and they’re already a great team member. On the surface it can look like a great decision, but after you gain some perspective, after you ask the right questions, when you find out how it might be damaging your culture, how it might be hurting your productivity and costing you a quarter of a million dollars more for the same work being done. If it’s a motivated team by the way, that wants to work overtime and as being highly productive, that’s a different story. But on the surface it looks like a good decision. What we discover when we spend time, really gaining quality perspective, really digging in and finding out are we making smart decisions?
What we discover is we’re actually hurting ourselves in the long run. Shoot, we’re hurting ourselves in the short run on this situation, right? But we’re definitely hurting ourselves in the long run. You have to understand not everybody is taught how to gain quality perspective and make quality strategic decisions.
So folks, hopefully this has helped you today to take a hard look at how you make strategic decisions. And obviously there is so much more to it than this. Come to the next level leadership live event, the stuff changed in your business. Let us help you to get there. As always, take this information, change your leadership, Change Your Business, change your life, and join us on the next episode.