Situation: A company uses outsourced manufacturing but is concerned about inventory damage by the manufacturer. Tests have been established to assure both visual compliance and functional performance, overseen by a company employee. Still the company is receiving too many unacceptable parts. How do you minimize inventory damage by an outsourced manufacturer?
Advice from the CEOs:
It is perfectly acceptable for a vendor of consigned materials to bear the risk of product that is not to specification.
In any contract for manufacturing, require that the vendor carry insurance to cover the full cost of materials and processing in case of damage either during manufacturing or shipping.
It sounds like this is a new opportunity and situation for the company. In the process they have not guaranteed that both cost and risk are covered.
There is no point in assuming all this risk.
For future opportunities like this, take on the work as a time and materials project at an appropriate hourly rate for the market, and with a significant mark-up to cover risk as the project is transferred to a contract manufacturer.
Another option is to take on the project under a project management contract, and to bill engineering separately.
This situation sounds familiar for an evolving project. In the future try to unhitch the manufacturing piece from the engineering. Engineering should be more profitable, which will allow the company to more successfully manage the project into early manufacturing.
Strategically, this could be a good move for the company provided they partner with a reliable vendor to facilitate early stage manufacturing. One option for paying sub-vendors is to pay for yield – particularly if early stage work has a high failure rate.
If the market opportunity is there do two things:
Set up an organization with professionals who know early stage manufacturing.
Be aware this group will have a different culture and approach compared to design engineers.
Situation: A company has a crowd sourcing solution which is co-creational. You ask a question and get multiple answers. The company then uses technology to select the best answers. The challenge is developing a business model. What parameters are predictable and dependable? How do you develop a revenue model?
Advice from the CEOs:
Revenue is always, in the end, a matter of value received – both potential and actual.
High dollar per click comes from delivering better responses, particularly if you can demonstrate higher sales conversion rates.
High value responses are valuable. If you can deliver these consistently, consider charging a subscription instead of pay-per-click. Pay per click is fine for attracting first-time users, but move to subscription for ongoing access.
Limit your initial audience to crowd source participants who have knowledge and experience – like CXOs on LinkedIn. Create relevant communities.
In addition to best practice answers, provide an opportunity for participants to share failures – experiences from which they learned. Simply Hired created an early, and lasting audience by creating a companion site called Simply Fired when they started. Based on the responses to this site, they created a Top Five Reasons for getting fired, with inappropriate behavior and sexual harassment at the top. This exercise helped them to create a lasting presence.
Make your site clean and show clear steps to a revenue model for users. This will take time and you won’t see results immediately. Over time it will pay off for you.
Situation: A company has been struggling to meet objectives. Financials aren’t completed on schedule, limiting the ability of the CEO to manage by the numbers. Milestones are behind schedule. The CEO was advised to consider stringent measures, including financial penalties, to force compliance to performance goals. In your experience, are negative incentives effective?
Advice from the CEOs:
There are at least three potential roots of this problem. Have your hired people who lack the skills to perform their functions? Is there a clear plan and set of priorities in place? Or are you as the CEO being consistent in your demands of the team? You need all three to meet your objectives.
Be sure to set SMART objectives: specific, measurable, achievable, realistic and time-bound. In addition, make sure that everyone understands how their performance impacts not only the plans of the company, but their salary and benefits as an employee. Be sure that everyone has the resources to complete what is expected of them.
Be careful if you are considering financial penalties, and negative incentives.
Many studies have shown that positive reinforcement is more effective than negative reinforcement.
If an employee is chronically behind on deliverables, ask what is happening and why they are not getting the job done.
If the response is not satisfactory, and performance doesn’t improve, you are better off terminating the employee than using negative incentives.
Often the question is not one of motivation but one of focus. Focus has to start at the top, and has to be maintained through departmental and team leadership. Make sure that there is proper training in setting and monitoring achievement of objectives throughout your leadership team. It helps if everyone clearly understands what the company is trying to achieve.
Key Words: Objectives, Achievement, Failure, Schedule, Manage, Numbers, Penalties, Compliance, Positive, Negative, Incentive, SMART, Resources, Achievable, Motivation, Focus, Training, Great Game of Business, Jack Stack, Understand