So, even though it’s the bottom line that counts, the top line has to be healthy too. No matter how efficient the operation is with all its parts, if the phone doesn’t ring, you have nothing. With few exceptions, after 9/11 we managed to hold on to all of our customers, and we rebuilt together.
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By 2003 we knew that although there was a lot of work ahead, we would be okay. Thanks to the improvements we had made on efficiency and pipeline, we were going to make it through. In September of that year, we were invited to a franchisee conference by our big Middle East customer—the one who’d just happened by our NRA booth in Chicago about ten years before—and Andrew and I flew to Dubai to attend. The temperature in Dubai at that time of year never falls below 100 degrees—even at night; it’s a fabulous city, but hot! Our hosts did everything just right, top drawer. Attendees were assigned places for all of the meetings, and all of the vendors were rotated to assure that they got to interact and sit with all of the franchisees at least once. There I was, a Jewish female business owner from New York among a sea of Middle Eastern men, quite a few of them dressed in flowing robes and headdresses, but I was treated as if I were one of them. Andrew blended in much better than I did! At the closing banquet, much to our amazement, Love and Quiches was honored as Vendor of the Year for the region. They recognized us for coming through the 9/11 tragedy with no lapses in our quality or service levels. I will never forget that evening.
9/11 set in motion what became a decade of change and improvements for Love and Quiches. By examining every aspect of our business and going from overstuffed to lean, we created a strategy that has allowed us to survive, thrive, and grow in any economic climate. First were the short-term survival strategies while we developed our new forward vision. We changed or refined our policies and procedures, instituted cost-savings initiatives, and didn’t forget to count the paper clips. We revolutionized our manufacturing procedures, developed quicker changeover times between products, staggered lunch breaks to keep the lines moving, scheduled all-chocolate days on the production floor, and so on. When it comes to improving efficiency, if you can think of it, do it!
After years of intense work, we’ve come out with a clear vision of where we are going and how we are going to get there. Even if lean operations and building our pipeline were our top priorities and ruled everything that came after those changes, our focus after 9/11 went toward the goal of becoming an organization that had a strong control of all its complex parts so that we could produce our excellent, high-quality quiches and desserts with efficiency and, above all, at a profit.
Chapter 11
The Next Level
All you have to do is look straight and see the road, and when you see it, don’t sit looking at it—walk.
—Ayn Rand
Through every new development in the relatively short history of Love and Quiches, one common theme always held firm: we were constantly moving to the next level. No matter what we encountered, we were always upping our game, building our organization, and preparing for future growth. If your company is going to truly thrive, you must be ready to constantly revolutionize your operations—sometimes in ways you never foresaw—and take the business to the next level.
In the years following 9/11, we continued our habit of forward momentum and took some giant steps. The sense of urgency created by that crisis and, later in the decade, by the financial crisis and the Great Recession became a significant lever for change for us to once again move to the next level—and to keep doing so even through the present day.
Building a Rock-Solid Organization
Even before those tragic events, as we crossed over into the twenty-first century, it had become apparent that too many decisions were still being made at the top, and we knew this had to change. We had learned to be lean, but an equally crucial achievement was the building of our organization from the bottom up with strong, high-performance teams and equally strong directors and middle managers. We needed to further develop an organization that could support the demand we had created.
One of the rewards of successfully growing an organization is seeing it develop from humble beginnings—perhaps just you and some part-time help—into a real fleshed-out and well-organized team. After the early years, when we hired our first rudimentary team, I was no longer alone. As our organization grew, more and more of us had the same goals at stake. We were all climbing the mountain together, solving and overcoming each obstacle. Now there are a lot of us, and each of us is skilled in his or her particular area. All the parts have come together, and, finally, we have more of a dance than a struggle to the top. But we do need to keep climbing. There is no other way to do it.
You all now know that I was singularly unprepared for opening a business, and a woman in manufacturing was a rarity back when I started. Thus the process of building an organization around myself was exceedingly difficult and seemed unattainable from where I started. But once I got into the rhythm, each step naturally flowed from the one preceding it. I built something, did something, and everything happened from there.
If I could do it, there is hope for others like me. (There are also a lot more resources to call upon now, a great advantage compared to when I started out.) Whether you’re talking about a small company or a middle-market one like mine, running it still involves the same twelve- to fifteen-hour workdays, the same hard decisions, the hiring, firing, and all the rest. If you have the backbone and a great idea, think it over very well and then, maybe, go for it.
So, as the years passed, we continued the process of, as Jim Collins says in Good to Great, “getting the right people on the bus,” and we continued tackling our constraints. I learned from the late Eliyahu M. Goldratt’s The Goal that a single constraint (bottleneck) can hamper the entire process. Having the right people, attacking and smoothing out our bottlenecks, keeping the sales coming, and never compromising on quality: all of these moved us closer to achieving our goals and sustaining that achievement today.
We think like the big manufacturing guys do. Our business has all of the same parts that General Electric must administer to succeed; each department needs to be held accountable for both performance and budget. At Love and Quiches, beneath the executive team at the top, eight main departments support the structure, each with its own director:
Finance and Administration
Operations (which includes all aspects of production)
Purchasing and Logistics (which includes customer service)
Sales and Marketing
Research and Development
Quality Assurance and Food Safety
Human Resources
Engineering
All of these departments are inextricably linked in the process of commercialization and bringing our products to market. Beneath this group of directors, there are middle management, team leaders, line leaders, and so on down the line, so that everybody knows where they stand.
We differ in one major way from the big manufacturing giants, though: we have never been confined by our business plan and its details, and we have always kept it fluid. Effective planning is essential, but your plans should not confine you to the point that they limit your ability to change direction, to be flexible when times change. Our flexibility has always been one of our strongest points—yet when it comes to the departmental structure that helps to support that flexibility, we’ve come a long way.
As a private family business, we have fewer layers of management in the decision-making process, which gives us an advantage over some of our larger competitors. We also know more than we did in prior decades, and that knowledge has given us our willingness to adjust to new realities. We can react more quickly to seize an opportunity; we can change course when necessary with a less jarring nudge. This flexibility allows us to move with the times, to read the market, which can change with amazing speed, or to deal with inevitable setbacks. We can also hold our employees’ feet to the fire more gently and without engendering pan
ic. No one here has to be constantly watching his or her back.
We know the strengths, weaknesses, and capabilities of each of our eight teams. We think of all of these teams as cogs in a wheel. Our team members have a keen sense that each part is highly dependent upon the others and that one weak link can bring it all to a grinding halt. We do not want that to happen. It is all about implementing a good strategy and recruiting good talent; with those two things, a lot can happen. These teams of people form the meat and potatoes of what we do; it is they that deliver the results.
As part of the process of improving our overall structure, we have become more collaborative. Here’s an example: we come up with new products to give our sales teams more ammunition. But, as is often the case, sales teams need to be controlled so that they don’t try to throw “upside-down widgets” our way. So before greenlighting product development, we always run new projects up through operations, purchasing, and engineering, which helps to ensure that our sales teams understand the constraints on what they can sell and reasonably expect the other departments to produce. As a private company we can act quickly while remaining coordinated internally, which helps us compete with the giants. Our customers like that.
Still Next-Leveling …
It seems that the process of next-leveling is never quite done for Love and Quiches. Each time I think we are there, there’s always a new summit to mount. So it is for any company. Often, refusing to take on that next challenge leads to stagnation and a slow but steady decline. That’s never been our mindset.
Because of our commitment to momentum and constant improvement, we have recently taken some bold steps. To start, we have hired some savvy, computer-literate supervisors and mechanics with firsthand experience, and our workers appreciate the more focused direction they are receiving. This process was initiated by our next-level chief operating officer (COO), who originally came to us from one of the industry giants. (Obviously this is another benefit of next-leveling; experienced employees bring their expertise with them when they come to you.)
To complement that initiative, he has begun what we have all dubbed “L&Q U”—Love and Quiches University. He constantly reminds our production workers: “First, we are going to train you, and then we are going to train you, and then train you yet again. And after that, we are going to train you and then train you even more.” The training area in our employee lounge is cordoned off with what resembles shower curtains when in use, and staff affectionately call it the “Shower Room.” There is almost always a training session going on in there. Training likewise takes place on the production floor, and we have called upon our equipment suppliers to send in technicians to retrain everybody on the use of our machinery. There is always something new to learn. And to increase the effectiveness of our work, our aim is to give everyone the skills they need to find and implement their own solutions. Our policy of educational training is good for them and for the company.
Our COO describes all of these improvements variously as moving around quite a few parts on the board, breaking the glass house, removing the clutter, and getting rid of the noise. He uses these buzzwords quite a bit—one of my favorites is “prior planning prevents poor performance”—but in doing so he has energized a lot of people, and they are all on board and loving it. I find myself repeating the buzzwords as well. It’s contagious.
He leads by example: “If you touch it, you can understand it; if you understand it, then you can change it.” By doing it himself first—taking training courses he’s established, adopting processes he wants the rest of us to adopt—he makes sure he gets his hands around any change before making it.
To guide our operations, we are now using the five basic principles of sound business practices. All standard operating procedures are designed around these five principles: Safety, Quality, Productivity, Communication, and Training. All the good results come from these five keys.
We also recently went live with a new and robust enterprise resource planning (ERP) business management software system that integrates everything in one place: accounting, inventory control (both raw and finished), labor, purchasing, sales, marketing costs, traceability, and just about everything else we do. It was very costly and took over a year to put in place, but we survived pushing the button and are pleased, so far, that the new system has provided us with much more accurate and finite information. Even better, it has delivered us from so much that had been recorded manually.
I admit that I am among the least computer literate of all of us, but I know a lot about this business and its details. One can learn quite a bit in forty years’ time. So before going live, I sat for countless hours with various staff organizing the data required, helping to cheerlead the grueling tasks and to point out what data needed to be cleaned up before being entered: garbage in, garbage out. As long as the information going in is good—and we devote a lot of training to making sure that it is—we can then use the information coming out to make more informed pricing decisions, production planning, and—most importantly—accurate strategic planning to keep moving the company forward. We can now make these decisions using up-tothe-moment information.
We measure all movement: pounds per employee per hour, per shift, per week, per month. We have industrial engineers on the floor with stopwatches who look for ways to do things with greater efficiency and with fewer non-value-added movements. They are also tasked with finding ways to reduce errors. Even taking the fatigue factor (yes, that too) into account, we have found ways to do things more efficiently with fewer people and with better results and quality. This is where I step back and let it happen.
One of the main functions of these engineers is to identify ways to mesh functions and divide areas of responsibility in order to avoid duplication of effort. (Jill and I did that on a rudimentary level forty years ago when she became the inside person, and I stayed outside with sales and delivery.) If you can save labor, you can reduce costs, and that will allow you to offer better pricing and compete more strongly for that new piece of business. Conversely, cross-training is equally vital to any business so that no function will ever go uncovered. Seeing to it that employees are cross-trained is one of our hard-and-fast rules for several reasons: One, when team members take off for a holiday or a vacation, they don’t have to worry that their desk isn’t being covered. Two, we are not left high and dry if the team member gets hit by the proverbial bus. And three, no one employee can ever have us over a barrel.
We use these same methods to measure and reduce waste. If you want to know where all your profits are going, just look in the dumpster. One of my most important pieces of advice is to take the waste factor into consideration when offering pricing to prospective customers. Otherwise, all your new business could end up low margin or break even or possibly result in a loss. It is very difficult to catch up on low-margin business once you accept it, and it may not be possible to catch up at all.
Never estimate any of your costs. By whatever method, make sure you know your material costs, labor costs, marketing costs, shipping costs, and all the rest for your particular business. We measure everything: throughput, output, materials as a percentage of sales, waste, sales per samples, sales per trade show, and so on. And everything gets shopped. By virtue of this, we know where we stand financially, and with that knowledge, we are able to make realistic projections in line with our resources.
I have been hammering home over and over that by far the most important thing I have ever learned is this: the purpose of business is the pursuit of profit, not glory. Profit is the engine that keeps us going. Since we constantly review our financials, we implement changes when we see the need, and we do not accept unprofitable business as we once did.
Our measurements don’t end on the production floor. We carefully analyze our customer base by channel: restaurant chains, retail, airline, military, convenience stores, and so on. This analysis helps us see where we need to concentrate, and with the information now available from our new
software, we are able to better analyze our profitability product by product and channel by channel. We also see which products can more easily cross over to more than one channel, and we push those products heavily.
Product rationalization is an important process in our sales analysis by channel. We now have hundreds of products across our customer base. It may be the same chocolate cake in ten different sizes, case packs, and varied decorations, but each one is considered a different product in our business. Each one must stand on its own, and if there is not enough volume to support a particular version, out it goes, even if it means having to disappoint a current customer. (We always offer a similar version that’s more widely bought across more channels and gently suggest that it was their idea!) Every reduction, even if it’s a very small one, is a victory for operations.
The yearly budgeting process begins during the last quarter of each year in advance of the year to come. For the first twenty years or so, all we did was get out there and sell. Now our sales force must estimate their sales customer by customer, taking attrition into account and also deciding what amount of new business they will bring on. They must do this not only yearly but monthly. Our salespeople are held accountable for bringing in the numbers they decide on. Then, based on those projections, each of the other departments—from operations to R&D to engineering—needs to formulate its own budgets, and senior management holds them equally accountable for keeping their spending within those numbers. Each department follows a similar path: all expenditures, from uniforms to capital expenditures and everything in between, are carefully planned. On occasion, adjustments must be made to account for events beyond our control or for new initiatives, but these are shared decisions. We track our progress, follow up, and revise as needed.
With Love and Quiches Page 14