Financial Reports for Managers - The 10 minute MBA

All managers should have a basic understanding of how the finances of a company work.  Accountants have a way of making the financial reports complicated, but if a manager sticks to the basics, they can understand how a company uses these reports to stay healthy.  I know there are a million sources for this information, but it should be in every manager's toolbox so I am including it as a post.
What are the most important financial reports for a manager to understand? 
There are many reports that a company uses to understand their finances, but there are three main reports that will tell whether a company is healthy.  They are:

1. The Profit and Loss statement, also called the Income Statement - This is basically a list of all the expenses of a company in any defined period subtracted from the revenue for that period.  A positive number means a profit and a negative number is a loss.
2. The Balance Sheet - This is a list of assets, which is what the company owns and a list of liabilities, which is what the company owes.  The difference between these two things is the value of the company, or the equity of the owners.  This doesn't mean you can buy a company for this amount, but gives a basis for what is called "book value".  The amount needed to buy a company (another way to "value" it) is either determined by the amount someone will pay for a private company, or is represented by the market capitalization (total value of all outstanding stock) of a public company.
3. The Cash Flow Statement - A company can make a profit and have lots of assets, and still go out of business if they don't manage their cash carefully.  It is like a house.  Let's say a person purchased the house for $500,000 and after 5 years it would sell for $1million.  That means the person who owns the house has made $500,000 profit.  The problem is that if the person can't make the monthly mortgage payments, the bank will force the person to sell the house.  That's great if the objective is to get the money out of the house - it is bad if the objective was to live in the house.

Let's look at each of these reports in more detail.

Profit and Loss Statement
 Image source: tutorsonnet.com
Costs - There are two basic ways that costs are categorized, fixed and variable.  Added together they are called Total Costs.

1. Fixed costs - expenses that are needed to keep the business running whether or not anything is produced.
1. Salaries
2. Rent/Mortgage
3. Depreciation
4. Equipment Leases
5. Property Taxes
6. Debt Payments
7. Insurance
2. Variable costs  - expenses that vary with the amount of goods or services produced.  Theoretically, if nothing is produced, there will be no variable costs incurred.
1. Labor Wages
2. Overtime
3. Materials
4. Utilities
5. Commissions
6. Freight In/Out
7. Packaging Supplies
8. Sales Taxes
9. Scrap
10. Tooling and repairs
3. Total cost  - the sum of all fixed and variable costs, TC=FC+VC, and can be represented in the following way:

Image source: Syncpal.net

Revenue - The amount of money a company brings in through sales.  There are other ways companies can bring in money, but let's just stick with sales for this illustration.

Now let's add two more important concepts, Contribution Margin and Break Even Point.

Contribution Margin - the amount of money left over after the variable costs have been covered for a product or service.  Basically this amount "contributes" to paying for the fixed costs.
Break Even Point - The point at which enough goods have been sold to pay for all of the fixed costs. 


Image source: fao.org

The concept of Contribution Margin is especially important because after the break even point has been reached, the contribution margin represents the profit that will be realized with each additional sale.  Let's use an example to illustrate why this is important.
Contribution Margin ExampleLet's say the break even point for a product that sells for $100, with a contribution margin of $25, is 900 units.  If the monthly sales are 1,000 units, the revenue will be $100,000 and the profit will be $2,500 (all the CM after BE).  If an additional 100 units could be sold, the Revenue would be $110,000, but the profit will now be $5,000.  This shows how a 10% increase in sales can produce a 50% increase in profit.  That's why it is important to understand the connection between Break Even and Contribution Margin.


Balance Sheet

Image source: unchained-entrepreneur.com

Assets - Here is a very simplified list of asset accounts

1. Cash
2. Investments
3. Accounts Receivable
4. Inventory
5. Prepaid Expenses
6. Property, Plants, Equipment (PP&E)
7. Goodwill - The amount paid for a company purchased above that company's book value

Liabilities - Here is a very simplified list of liability accounts

1. Accounts Payable
2. Reserves
1. Unpaid Benefits
2. Unpaid Taxes
3. Notes
1. Loans
2. Line of Credit
3. Notes for equipment

Equity

1. Paid in capital - Money that the owners put into the company.
2. Retained Earnings - All the earnings not distributed to owners from previous years.
3. YTD Income - This year's earnings

Cash Flow Statement
Image source: dailymarkets.com
From Operations

1. Sales (+)
2. Materials (-)
3. Labor (-)
4. Expenses (-)

From Financing

1. Loan Service (-)
2. Dividends from investments (+)
3. Dividends paid to shareholders (-)
4. Taxes (-)

From Investments

1. Capital equipment (-)

How are the Balance Sheet and the Profit and Loss Statement (Income Statement) connected?

Any change to the balance sheet that is not balanced by another account on the balance sheet must "flow through the income statement". For instance, if a loan is paid off, the liability can be cleared by reducing the cash assets, which means the accounts remain in balance and would not have an impact to the Profit and Loss Statement. However, if it is determined that a valuable piece of equipment was stolen, this can not be balanced through a liability adjustment, so it must be reflected as a loss on the income statement.

That's what I think.  Tell me what you think.

Cliche #6 - The Truth

Frank's Management Cliche #6                                

"There can be only one source of the truth"

Explanation:

If there is only one source of the truth, then everyone can rely on it.  If there is more than one source of what is believed to be the truth, then if they all don't say the exact same thing, the organization will not know which to believe.  The best source of the truth is something that everyone can access.  If it is company information, then that source should be the company database in the computer.  Here is a good example: 

Bob, the production supervisor, walks into the manager's office and says "I have twenty parts short on the Alpha machine.  Here is the list I made".  The manager says "OK, let's go over to Production Control and make sure they are chasing those parts."  The manager and supervisor walk over to the planner for the Alpha product and ask her what parts she is chasing.  Jill says "right, I made a list of the missing parts yesterday and here it is". The manager compares the two lists and sees that there are parts on the supervisor's list that are not on the planner's list, and vice versa.  The manager takes the supervisor and planner in tow and walks over to the buyer's desk.  The manager says "It appears there are parts short on the Alpha machine and I want to make sure you are ordering them as an emergency with our vendors".  The buyer, Tim, says "I know, Jack called me the other day and told me to order some parts, and I called and put the parts on order. The parts will be here today."  The manager breathes a sigh of relief until he looks at Tim's list.  It is different than both Bob's and Jill's lists.  The manager notices that all the lists are hand written and muses "I wonder what the computer thinks."  Tim makes a few key strokes and produces a list of parts the computer shows as missing from the Alpha machine.  It is different than all three hand written lists, and probably just as wrong. 

The above example is just one of many that would illustrate the same thing.  Other examples include the group travel schedule, customer contact list, project task list, personnel roster, etc. Basically anything that changes dynamically. 

The manager should insist that there be only one source of the truth.  That way as soon as someone learns of a change, or additional piece of information, the single source can be updated with this new information.  To train people to do this, the manager should only rely on the single source.  If someone brings information from some other source, the manager should send them away to get the single source.  If new information is different from the what the single source shows, a reconciliation must take place to make sure the single source is accurate.

Mentoring

Mentoring was originally part of Employee Development, but it is different enough to deserve its own post.  Besides, many people have told me that my posts are too long to absorb in one read.  This is my attempt to break it up a little.  Interestingly, my longest posts get the most views.

What is the difference between Employee Development and Mentoring?

Employee Development is what a manager does with several employees under their charge.  This is actually part of the job description, or at least the expectation of good management.  Mentoring, on the other hand, is a 1on1 relationship between a "Mentor", and a "Protege" that can, and usually does, last a long time and transcend jobs and companies.  It is common for the mentor/protege relationship to begin when both people working for the same company with the mentor being senior to the protege.  The protege often reports to the mentor, but sometimes they are in different areas of a company.  The relationship can be a long lasting one that stays in tact after both people have left the company and sometimes the mentor may be retired while the protege maintains the relationship while still progressing in their career.  This relationship is usually the foundation for a long lasting bond that is not only professional, but a strong friendship.

How does a manager foster a mentoring relationship?
The basic elements of a mentoring relationship is the mentor believes they have something to offer the protege and the desire to guide them and the protege values the wisdom and experience of the mentor.

1. Mutual trust and respect - For the relationship to work, both parties must trust each other.  This means keeping the conversations confidential.  The mentor must truly believe in the protege's potential and each must respect the judgement of the other.   
2. Be available - If a junior manager or employee seeks the manager's guidance, they must be available to help.  This doesn't mean just physically available, but able to give the protege undivided attention and thoughtful advice.
3. Maintain credibility - The mentor must have more than just good common sense.  They should know the industry, the culture of companies, and the potential political pitfalls of the corporate world, etc.
4. Listen - The protege should make their own decisions and sometimes may just need a sounding board before taking a career step.  Asking questions that will help the protege talk, and think, through all of the factors in making a decision may be the best way to help them.
5. Have empathy - The protege may be struggling with decisions that may seem obvious to the mentor because of their experience, but the mentor must put themselves in the shoes of an inexperienced person, or at least recognize how difficult the decision may be for the protege.
6. Be honest - A protege may want to go in a direction that the mentor does not think will be successful, or that the protege is not yet ready to tackle. It is the protege's decision to make, but if they are not ready the mentor must let them know and have specific, concrete reasons why.
7. Develop good coaching skills - The interesting thing about coaching is that it is about knowing how to perform as opposed to doing the actual performing.  The best coach gets satisfaction from watching, from a distance, while the athlete performs.  The coach knows that their contribution was essential, but may not be readily apparent to either the athlete or the spectators.  The mentor must learn to provide a guiding hand without needing to be in the spotlight.

That's what I think.  Tell me what you think.

Employee Development, Benefits far outweigh costs

The fact that most managers spend zero time on this topic means that they are either too consumed in their day to day duties, or they don't see an acceptable return on the investment of their time or the companies resources.  In this post we will discuss why developing employees is important and worthwhile and then we will discuss how to do it. 

Please keep in mind that this blog is intended for the senior manager to engage in a dialogue, or forum with their managers to help them grow as managers.   The question at the top of each section can be asked of the group, and then the facilitator, or trainer can use the answers provided here as a way to guide the discussion.  I'd love to hear from managers on their own examples, or amplifying or differing opinions about the information provided here. 

Note: The term subordinate is used to mean either a front line worker, an experienced or new individual contributor, or a junior or senior manager, but always junior to the manager reading the text.

Why should a manager spend the time and resources on the personal development of their employees?

1. Strengthen the team - As each team member becomes more confident in their position and learns more skills, the more things actually get accomplished and the easier it is to get things done, and the more time the manager gets to focus on strategy and planning.  It really is an upward spiral.  The more time the manager spends on developing subordinates, the stronger the team becomes and the more time the manager gets to spend on developing  the team further, the more the team gets done, etc. etc.
2. Make the company more valuable - If the cliche about the biggest asset a company has is its people is true, then the better the employees become, the more valuable the company becomes.
3. Improve morale - When the manager takes an interest in their employees as people, and invests in developing their skills, it will improve how the employee views the manager and the company.  Good morale doesn't always lead to better performance, but bad morale almost always leads to worse performance.
4. Succession planning - There are many aspects to succession planning in the manager's mind that is affected by developing employees in their group.  Let's take a look at a few of the main ones:
1. What if something happens to the manager - Hopefully it is a promotion, or a better job somewhere else and not the proverbial "run over by a bus" accident.  If the manager has done a great job of developing subordinates there may be someone who can step in to the manager's role
2. What if the manager wants to leave - The manager may want a promotion or another job in the company, but can't be considered for the job because their current organization can not function well without them at the helm.
3. Morale - Employees feel better about a company that not only talks about wanting to promote from within, but systematically prepares existing employees to be ready for promotion.
5. Attract better talent - When the word gets out that a manager works to develop the talents of their employees and is good at it, everyone will want to work for them.
6. Retention - This works as a retention tool because as long an employee is gaining more skills and developing as a person and an employee, it will take a compelling offer to get them to leave.  One potential down side of developing employees is that they become a target for other managers in the company, or other companies, when they need talent.  That is not an entirely bad thing for a manager, because it enhances their reputation. 
7. Allow employees to reach their full potential - Sometimes a manager will spot great potential in an employee to better themselves and bring significant value to the team and the company.  The skilled manager can help make this potential become a reality.
8. It is a good skill to have - Particularly as a manager becomes more senior, their ability to develop subordinates becomes a part of their primary job description.
9. Enhance the reputation of the manager and of the team - This is the net result of all of the above.

What are the sources of development in employees? 
In other words, where do employees learn the things that either help or hinder their development?

1. Their managers.  That's right.  One of the biggest developers of employees is the example they see in their bosses.  It is not just the good example that will leave an impression.  Employees can also learn what not to do from a poor example.  Unfortunately, junior employees may not know what is good or bad behavior in a manager and may learn bad habits from the inexperienced, or badly behaving boss.  This means that a manager doesn't need to send an employee to a training course, or create a development plan to make an impact on the development of an employee.  Just by behaving with high integrity and competence could be the best way to develop subordinates.
2. Doing challenging jobs or tasks - figuring out what to do, executing a plan they developed, and seeing the results is another top way employees develop.  Both successes and failures can have a profound impact on an employee's development.  Trial and error is a great teacher.  The pressure of making important decisions that affect their reputation, their careers and sometimes the success of the whole team, builds confidence and resourcefulness in both individual contributors and managers.
3. Failures, setbacks, falling short - One of my cliches is "You can tell much more about the character of a person when they get knocked down, than when they win easily".  Reflecting on the job not gotten, the bid proposal not accepted, coming in second (or last) can provide unique insight for a person that can be more valuable than the easy win.  How a person reacts to these setbacks can be an important component of their development as a person, employee, or leader.
4. Life experiences - There are many things that happen outside of work that contribute to the development of a person.  A few include - the way they were raised, participation in sports, a family crisis, or development they gain from coaching or volunteer work.
5. Formal training - I differentiate between formal training  and formal education.  An employee can gain valuable skills and expertise from training.  These can range from a few hours to a few months in length.  Training programs typically concentrate on a narrow scope and provide specific information to be retained and used later.
6. Education - Education differs from training in that although the course may provide significant detailed information that can be used on the job, the developmental aspect of the education is more in the ways a person learns to approach problems and research possible solutions.  Education refers mainly to college level courses, and ultimately degrees, taken at a school of higher learning.

How should a manager go about developing their subordinates?
Now that we've discussed what develops people in the general case, we can now use that  information to discuss what a manager can, and should, do to develop their subordinates.

1.  Provide a positive role model - If a manager wants their team to treat everyone fairly, act with integrity, consider all relevant factors before making a decision, have a balanced work/personal life, then that's how the manager should act.  Bottom line - Lead by example.
2. Delegate important and challenging tasks - Notice that the first two items listed should happen as the normal work routine.  Without even thinking about developing their subordinates, managers that do these two things could be doing a good job of developing them.
3. Analyze the strengths and weaknesses of the team as a whole, as well as each individual team member - If the team needs a second baseman, who has the potential to be good at second base?  Once the team as a whole has been addressed, then the manager can focus on each person individually in developing them based on their individual strengths, which may or may not be a current need of the team.
4. Help the subordinates understand their strengths and weaknesses - this can happen in many formal and informal ways, such as:
1. Performance reviews - This is what most companies use as the primary method of forcing a discussion between bosses and their subordinates.  These can be effective, but the frequency tends to be only once a year, which is too infrequent to actually have a positive effect.  The other problem with annual performance reviews is that in an attempt to make them easier for managers, they have become mostly fill in the blank forms and grading check sheets that don't provide much intimate communication between the manager and their employee.
2. Formal career counseling or development plan discussion - These don't occur very often in the work place, but scheduling and conducting a formal career counseling session with an employee can be very illuminating to the manager about the aspirations of their employee and very morale boosting for the subordinate.
3. Informal discussions - Every conversation with a superior is usually listened to very attentively by a subordinate and what is said can carry a lot of weight, even though the manager may not be aware of how important their choice of words can be to the subordinate.  On the other hand, if the manager listens closely to a casual conversation with a subordinate, they may learn a lot about the direction the subordinate would like their career to take.
4. Encouragement and recognition - Positive reinforcement for any behavior has a good chance of encouraging the same behavior in the future.  If the manager believes that taking risks is important to development, they should recognize and encourage employees who take calculated and reasonable risks.  
5. Provide timely feedback - Feedback is a critical assessment of the employees actions close enough in time to the actual effort to help them see what was effective and what was not effective.  This should be done continuously and consistently in the spirit of helping, but the manager must be careful not to be perceived as a "micro manager" or "nit picker"
6. Hold employees accountable for their performance - Remember that a failure, or setback, can be a huge driver to development.  The employee will remember and learn from the manager's candid assessment and consequences of poor performance, a bad decision, or lapse in judgement.  There is a reason for the popular phrase "Tough Love".
7. Help subordinates see a path to meet their career objectives - Whether it be in job selection, training, education, or volunteer work.
8. Map out a development program with the employee's collaboration
1. Challenging jobs or tasks
2. Identify the need and opportunities for training
3. Recommend a reading list
4. College courses
5. Opportunities outside work

What would a Development Plan look like?
Keep in mind that this is not a performance review, or a superior-subordinate task discussion.  It is an attempt by the manager to help a subordinate take actions that will help them in the future, and that future may, or may not, include the current manager.  In other words, even though many of the elements are similar to other directed tasks, the manager should take a much softer and collaborative approach to this discussion.

1. Pick a short time frame
1. Don't rely on the annual review, the time frame is too long
2. Plan should be executed inside of 90 days or less
3. If longer projects are needed, pick smaller milestones that can be accomplished and assessed inside the 90 day window.
2. Be specific in what needs to be done - If it is a training course, which one should be taken and how will it help develop the employee.  If it is a project or challenging task, what exactly is expected? 
3. Define specific success criteria
4. Establish a realistic time line
5. Focus on strengths, not weaknesses - Managers spend so much time in damage control mode, that it is easy to focus on overcoming the shortcomings of an employee.  Most people will get further in their careers by developing their strengths rather than working on what they don't already have.
6. Involve the subordinate in developing the plan
7. Recognize and reward achievement 

That's what I think.  Tell me what you think.
Leave a comment, or send me an email.  Do you have an example that illustrates a point made here?  Have you tried something that didn't work?  Did you find the post helpful?  Did you forward a link to someone you thought could gain something from the discussion?

Effective Interviewing

Hiring good employees is a primary responsibility of managers. That being said, any manager who says they have never made a bad hire, simply hasn't hired many people. Every hire is a gamble made with very little information.  This post is an attempt to arm the manager with some tools that will help them gather as much relevant information as they can in the one or two hours they get with a candidate before deciding who is the best candidate for the job opening. 

A manager can improve their chances of making a good hiring decision by having the candidate interview with as many people as is practical.  It is their own judgement, however, that carries the most weight.  For the purposes of this post, it is assumed that the manager and HR have done their job in creating an excellent job description and have lined up several seemingly qualified candidates.

The keys to an effective interview are as follows:

1. Preparation of an interview worksheet tailored to the position.
2. Thorough review of the candidate's resume and cover letter.
3. Execution of the interview
4. Post interview summary
5. Bonus - Reference check questions

Let's take them one at a time.

Preparation of an interview worksheet tailored to the position.
An interview worksheet is simply a list of questions that are designed to give the interviewer a thorough understanding of the candidates experience, expertise, and motivation for the position.  By using the same, or similar, questions for all of the candidates provides a level playing field for all candidates.  Once a good interview worksheet has be created for a particular position, it can be saved and reused whenever that position is required.  This allows the worksheet to evolve over time to become increasingly effective and a manager can tailor them to new companies or situations.  Obviously the questions will be different for a manager versus an individual contributor, or an accountant versus an engineer, but some questions are relevant to all candidates.  The worksheet should have a space for the candidates name and date at the top of the first page and no more than 6-10 questions should be printed on each page to leave space for writing the candidates answers, or interviewer observations, feelings, or other comments.

The interview worksheet, and therefore the actual interview, should have four sections.

1. Work History
2. Technical
3. Motivation
4. Business Personal

1.  Work History
This is the section where an interviewer learns about items in a candidates resume and cover letter that are relevant to the job,  What companies have they worked for, what were their positions, who did they report to, etc.  Additionally, this section  is where any questions generated from the resume review will be asked.    There may be many things about the job opening that are not in the resume, and those things will be covered in the Technical section.  Here are several questions that might be asked in the Work History section.  Notice that most of the questions are written exactly as they would be asked. 

1. Tell me about your last company, including size, organization, scope of your position, who you reported to, where did you fit in the organization, what do they make? This question can be shortened or expanded depending on whether the interviewer is already familiar with the companies where the candidate has worked.  It can also be broken up to ask several questions instead of one long question.
2. Who were your main customers at _____?  What percentage of your time was spent with customers?
3. You mentioned that you increased profits at _____.  What exactly did you do?
4. Your resume states that you improved the safety record at several companies.  How did you do that?
5. What coding language did you use at _____ and ____.  Which one did you like better?
6. How often did you close the books at _____.  What was your role in the close?
7. Why did you leave ______.  It looked like you were very successful there?
8. What ERP system did they use at _____.  How proficient are you in using it?
9. What reports did you develop to manage your department at _____?
10. What accomplishment at ______ are you most proud of?
11. What would your subordinates at ______ say about your management style?

2.  Technical
This is where the interviewer explores the candidate's background concerning the specific technical aspects of the job.  These may or may not be in the candidate's resume.  In some instances a candidate may not have any experience in a particular area, but can still discuss what they would do in a given situation, or how they would handle a new challenge.  Here are some possible questions:

1. What is the role of the Document Control Manager in handling new products?
2. Describe a difficult personnel situation you experienced and how you handled it.  How would you do things differently today in the same situation?
3. How much do you know about California Employment Law?
4. How often do you recommend reconciling balance sheet accounts?
5. How often did you have to deal with lawyers?  What are some examples?
6. How would you approach an initiative to reduce product costs ( labor costs, programming costs, freight costs, travel expenses, etc)?
7. What would you do to improve inventory accuracy?
8. How would you handle an upset customer?  What would you do if there was no way to satisfy them?
9. Explain your experience with inventory valuation (tax preparation, cost accounting, payroll, AR collection, AP - discounting & payment philosophy, working capital management & control, budget preparation, asset management, product costing, etc).
10. How would you improve inter-departmental relations between Ops, Finance, Sales, Marketing, Customer Service, HR, Quality, R&D, etc. (pick two)?
11. How do you measure the success of a sales person (hit rate, volume, margins, customer feedback, etc.)?

3.  Motivation
In this section the interviewer is trying to find out what makes the candidate tick.  What is important to them.  What do they like and what type of environment is right for them.  Here are some typical questions:

1. What part of your job do you enjoy most? Why?
2.  Explain a situation, or a few situations, where you showed initiative - what were the reasons for the effort. What were the results?
3. What characteristics do you possess that have helped you be successful?
4. Explain a failure on your part and what you learned from it.
5. What is the ideal work situation for you?
6. What is the ideal relationship you would like to have with your supervisor?
7. Why are you interested in our company?

4.  Business Personal
Always be careful to call these questions "business" personal and not just personal questions.  It can be seen by the questions below that all of the questions are appropriate to be asked, but if you say to a candidate that you will be asking them personal questions, they may become apprehensive about the type of questions that will be asked.  Here are a few:

1. What did you like least (best) about the job at _____ ?
2. How important is the title to you?
3. How long is the commute?  How do you feel about it?
4. How is the search going?
5. Where would you like to be in your career in 5 years?
6. Why are you looking for a new job?
7. What questions can I answer for you?

Thorough review of the candidate's resume and cover letter.
Although some people still swear by them, I have found cover letters to be essentially a waste of time.  However, if one accompanies a resume of a candidate that will be interviewed, it should be read.  The resume, on the other hand, is essential.  The interviewer should have only two things in front of them when interviewing a candidate, and they are the candidate's resume and the interview worksheet.  I recommend highlighting anything in the resume that the interviewer may want to refer to during the interview.  The Work History section of the interview worksheet should be updated with a few questions that come directly from the resume.

Execution of the interview
There are some obvious hospitality items that should be mentioned.  Make sure the interview is conducted in a quiet comfortable place.  Offer the candidate something to drink.  If the interview will be conducted in the manager's office, turn off the phone and don't allow any non-emergency interruptions.  Describe for the candidate the four sections and that the interviewer will be writing constantly, but to ignore it.  Do not sit in such a way that the candidate can read what is being written. 

Try to be consistent in writing things down and don't only write just after the candidate has said something.  The things to write down are a combination of several things, including what is said, the impressions the interviewer gets from the candidate, follow up questions to ask later, unrelated questions or comments that are relevant, etc.

Don't allow the candidate to ramble.  Once a question is satisfactorily answered (or not), stop the candidate and move to the next question.  It may be useful to tell the candidate that this will happen and it shouldn't be interpreted as not wanting to hear what they have to say, but that time is limited and there are a lot of questions to ask.

When asking questions, there are really three things to determine.

1. What was done - This means what did the candidate do specifically.  How did their specific actions impact the result.  The more detailed a person's answer, usually the more they know what they are talking about.
2. What were the results - Again there should be a direct correlation between what was done and what was achieved.  If the candidate does not see this connection, they probably weren't the real driver of the results.  It could be that they were told what to do and they did it.  That may be OK for the current job, but maybe it isn't.
3. Why was it important to be done - This is a little more subtle.  In the universe of things that could be done, and with limited time and resources, why did the candidate pick this item to do and highlight on their resume or in the interview.  It may be that they were told to do it, or that it was obvious, but maybe they have another reason.

Don't feel obligated to ask every question.  If a question was already answered previously, or just doesn't feel relevant, skip it.  If the interviewer decides early in the interview that the candidate is not suitable, still ask one or two questions from each section.  Do not abruptly dismiss the candidate.  The candidate has gone to a lot of trouble to be seated in front of the manager and deserves to be interviewed seriously.  That does not mean to spend the maximum time, but enough to show the candidate the right level of respect for their time.


Post interview summary
After the candidate has left, and ideally immediately after, the interviewer should write a few paragraphs on their impressions of the candidate, both positive and negative.  This is very important.  If several candidates are interviewed for a position and an obvious winner is not apparent, it is the summary that will be referenced most often.  Most people will not go back and review every answer, but will definitely reread the summary.  I also strongly recommend spending a few minutes going back over the worksheet to make sure what was written will make sense later.  The interviewer's shorthand during the interview can be indecipherable later, even to them.


Here is the bonus

After a candidate is selected, references should be called.  Most people who serve as references are given by the candidate and will be an advocate for the candidate.  There is nothing wrong with that because most people won't outright lie.  Here are some questions to get a person to give a more balanced view of a candidate.

1. What was your relationship with _____ ? Do you remember their exact title?
2. How long did you work together?
3. ____'s management style seems very developed and effective, is this how you remember them?
4. Since I will be _____'s direct manager, where do you think I could best help them develop in their career as a manager?
5. Why did they leave?
6. Would you hesitate in putting _____ in front of the CEO, or important customers?  How do you think they would perform in those situations?

Obviously I am a big fan of the interview worksheet.  I have worksheets for the following positions.  If you are hiring for one of these positions, please send me an email and I will send it to you free.  If you want more than one, they are for sale.

Accounting
CFO, Controller, Accounting Manager, Cost Accountant, Plant Accountant, Accountant
Sales
Sales Manager, Program Manager, Customer Service Manager, Customer Account Manager
Engineering
Design Engineer (new grad), Drafter, ECO Manager, Engineering Manager, Industrial Engineer, Manufacturing Engineer, NPI Engineer, Manufacturing Engineer (new grad)
Materials
Buyer, Expediter, Inventory Manager, Materials Manager, Senior Buyer, Sourcing Manager, VP Supply Chain
Quality
Quality Manager, Supplier Quality Engineer
Miscellaneous
Human Resources Manager, Administrative Assistant, IT Manager, Operations Manager, Reference Check

Cliche #5 - Daily Planning

Frank's Management Cliche #5

"Spend three hours planning what to do with the other five hours in the day and you'll get more done than if you just go to work"


Explanation:

As in most of my cliches, there is a bit of exaggeration to make a point.  Probably most people will key on the eight hour day.  I know that most managers would love to only have an eight hour day.  Managers have many more things to do than they could possibly actually accomplish.  That means that a manager must be very good at prioritizing their work, delegating what others can do, and discarding what doesn't need to be done.  That can't be done effectively without a plan.  Every task must be weighed against all the others for both importance and urgency before deciding where to put effort.  This means that it is imperative that a manager spend some time every day evaluating what needs to be done and scheduling tasks based on their relative importance and urgency.  Without a plan, a manager will default to what is urgent.  The last email, the last colleague interruption, the last phone call, etc.  At the very least, the manager will end up spending several extra hours at work every day as they realize at the end of the day all the things that they didn't get to.  Without a plan, the day starts out slowly with lots of time wasters finding their way into the day.  The manager gets serious only after realizing that they have squandered away most of their time.  Unfortunately the same thing happens the next day. 

Tasks come to a manager from many different sources.  The boss gives tasks, subordinates need help, emails bring tasks, the phone brings tasks, meetings result in tasks, etc, and last but not least, the manager may have some tasks that they determine for themselves.  The effective manager will create a single list of tasks from all the sources and evaluate and schedule them in the appropriate priority.  This is not a two minute exercise each day.  Three hours vs. five hours is probably too much, but the point is that it takes time to plan properly, but the benefits are worth it.

Time Management

There are two aspects of time management that we will discuss in this post.  The first aspect is what a manager should spend time on, and the second aspect is a discussion of strategies to maximize how much work can be completed.  There are many sites on the internet that give tips on time management.  Virtually all of them deal with ways to be efficient in the use of time.  As a manager, it is first essential to know what is most important to work on, and secondarily to be efficient. 

Importance & Urgency
By far the best presentation I have found on where a manager should spend their time is by Stephen R. Covey in his book The 7 Habits of Highly Effective People.  His concept of  determining the urgency and importance of tasks in deciding where a person should spend their time is even more critical for a manager.

Start with the simple premise that all tasks have some level of importance and urgency.  That means that all tasks can be put into one of the following buckets:

1. Tasks of High Importance and High Urgency.
2. Tasks of Low Importance and High Urgency.
3. Tasks of High Importance and Low Urgency.
4. Tasks of Low Importance and Low Urgency.

Let's now look at the types of fall into each of these buckets and how a manager should treat them.

Tasks of High importance and High Urgency - These are tasks that must be done.  There is no debate when a task is both urgent and important - do it now.  A manager can not usually control these tasks, they control the manager.  Whatever time is needed to resolve an important and urgent task will be consumed.  The only thing a manager can do is to prevent a recurrence of the task in the future, or to deal with it sooner, before it becomes urgent.  Here are some examples of important and urgent tasks:

1. Health emergency (heart attack, office or industrial accident, etc.)
2. Urgent request from a customer
3. Critical machine breakdown
4. Specific direction from a supervisor
5. Any number of actual business or personal crises

Tasks of Low Importance and High Urgency - These are tasks that may not even need to be done, but if they are going to be done, they must be done right now.  Typically a manager has some choices when faced with a low importance and high urgency task.  The manager can choose to do the task, or they can choose to ignore the task.  They may decide to do the task later, or delegate it to someone else who would also then have the same choices.  The key concept to understand is that the manager has control over these tasks.  Examples of  urgent, but not important tasks are:

1. Interruptions by colleagues
2. Most incoming telephone calls

Tasks of High Importance and Low Urgency - These are tasks that are important to the business, but don't usually have a specific deadline.  These are tasks where the manager has control and choices.  Most managers will agree that they should perform all important work and give this work a significant portion of their time.  The problem is that these tasks are not urgent and can be put off.  As we stated earlier, the urgent and important work definitely gets done because there really isn't a choice.  The more time a manager can spend on tasks in the High Importance/Low Urgency bucket, the more successful they will be and the more prepared they will be for promotion to the next level.  There are many examples of tasks that sit in this bucket:

1. Crisis and problem prevention
2. Planning
3. Long term projects
4. Developing strategy
5. Resource planning
6. Infrastructure building
7. Determining and communication priorities
8. Building relationships with
1. Customers and potential customers
2. Peers inside and outside company
3. Subordinates
9. Training employees
10. Recognizing and rewarding good performance
11. Providing valuable feedback to employees
12. Learning a new skill

Tasks of Low Importance and Low Urgency - These are tasks that really don't need to be done at all.  These are tasks that fill up the day and get in the way of spending more time on important/non urgent tasks.  Unfortunately these tasks are frequently fun, or easy to accomplish, so they are very attractive time wasters.  Some examples of unimportant/not urgent tasks are:

1. Any time wasters
2. Busy work
3. Organizing file drawers
4. Rethinking already made decisions
5. Reading superfluous emails

It is up to the manager to determine what is important.  The better they are at determining what is really important, and then being disciplined in spending as much time as possible on those tasks, the more successful they will be.

Now it is time to discuss how to be efficient in the use of time.

Time Management Strategies and Tips

1. Create a "To Do" list and update it daily - There should be only one task list.  If a task comes in by email, phone, verbally from superior, at meetings, etc. the task should go on the list.
2. Prioritize all tasks by relative importance and urgency - Put the important tasks at the top and less important tasks at the bottom of the list.
3. Plan for a longer time period, at least a week - The important/not urgent tasks will get lost if the plan is for only one day.  Put a placeholder in the week's plan for non urgent but important tasks.
4. Plan the day - every day 
5. Review how well the plan was executed
1. Hour by hour, by putting a "Planned" and "Actual" column into the daily plan by hour
2. At the end of the day
6. Schedule tasks, especially unanticipated tasks that crop up during the day - It is tempting to accomplish the task that just showed up so you won't have to put it on the To Do list and schedule it, but it only takes a few of those 5-15 minute tasks to blow the day's plan.
7. Don't be a slave to email - This doesn't mean to not read them.  Schedule a time, or several time segments during the day to read and deal with emails.  Don't allow the arrival of an email to be like the ringing of the phone that must be answered immediately.  A manager should train their staff to know that if something is truly urgent, an email is not the right way to communicate the task or event.
8. Don't be a slave to the phone - It is OK to answer a ringing phone, but quickly determine what is needed and schedule a time to return the call.  Any task received by phone is still a task to be scheduled in its relative priority.  It is particularly rude to stop a scheduled conversation with someone to start a conversation with a person who has called on the phone.  It is OK to answer the phone to stop the ringing and tell the person on the other end that you are busy and will return the call as quickly as you can.
9. Delegate all appropriate tasks
10. Manage interruptions
1. Office drop ins - Find out what is needed and schedule it.
2. Telephone call requests - Put them into the To Do list and schedule them
3. Email requests - Put them into the To Do list and schedule them
11. Find ways to perform mechanical tasks  in parallel instead of in sequence - This only applies to mechanical activities that don't require much thinking.  This is not recommended for tasks that require the manager to be mentally present.  For instance, a manager should not read emails during conference calls, no one should text on the phone while driving, or go to meetings and work on other tasks. 
12. Separate large jobs into several small jobs - use the small tasks as filler items when there is a small time gap in the daily plan.
13. Bonus Tip - Spend more time with those who help you achieve your goals and less time with those who slow you down.