Financial Management - All Posts - Ze'ev Ronen - Business Excellence

Assuming the company sells 20 products, the items are listed from the products generating the highest profit at the top of the list to the products generating the lowest profit at the bottom of the list. According to the Pareto principle, there is a good chance that the first four products on the list produce around 80% of the company’s revenues. If we focus on improving the profitability of these four products, we will achieve substantial improvement of the company’s profitability in an effective way.

Part VII is the last chapter in the series. It includes a short summary of the previous chapters.

In the current series of articles, I focus on the important KPIs every business must monitor. I have already written many articles regarding this very important issue. However, this article focuses on concisely presented KPIs with links to learn about them in greater detail.

It is widely accepted that without data and careful analysis, businesses cannot advance. Not assessing and not controlling processes is like driving a car without the ability to see the way or check how much petrol is left in the tank.

This article was written during wartime. Life continues and businesses continue to operate. I have recently been asked many important questions regarding the correct way to operate a business in the face of the current difficulties and obstacles.

A few days ago, at one of my late-night stops at a gas station, I felt like eating a popsicle. Unable to decide which brand to choose, I bought one of each. At that point I noticed that although wrapped in similar size wrappings, one popsicle weighed more than the other. MAGNUM weighed 85 grams while Milka weighed only 69 grams. The Milka popsicle is more expensive. Yes, it costs more though it is substantially smaller.

Does everyone know what other people earn in your company? If the answer is “yes”, is it official information or is it spread by word of mouth? What effect does knowing what other people earn have on gender pay? How does it affect employee’s motivation?

Yesterday we hiked from Neve Ativ to Birkat Man and from there to the lower parking lot of the Hermon site. The weather was wonderful. The sun was with us all day. There was snow, there were amazing views and an excellent group of hikers. Bottom line - it was excellent. But as sometimes happens, the road to the goal – the trip – was full of pitfalls.

Someone once called me for advice. He told me he was self-employed and asked if I could help him collect money his customers owed him. The amount of the debt was about 1 million NIS. He worked for two years without receiving payment.

Yossi called me, introducing himself as an investigator of cybercrime. He asked me if I'd been the victim of cybercrime in the past year.

I don’t know about your specific company, but usually the first step is layoffs. Most often, labor costs aren’t the biggest expense, but it always seems simplest, fastest, and easiest to fire employees - and if and when sales are back up, recruit new ones. Furthermore, we know there is always latent redundancy, so we assume any reduction in the workforce will lead to greater efficiency.

It might seem odd, but some businesses and people benefited from the global effects of the pandemic. For example, let's say you're a manufacturer of a niche product like facemasks, and suddenly it becomes the most sought after product worldwide, sold for exorbitant prices. It can seem as if luck fell out of the sky, into your lap. What will you do?

Ei'lam and I analyzed the company's operations, and for all other fields managed to create a profit generating work-plan with reasonable effort. Contrastingly, it seemed impossible to create such a work-plan for the import and distribution side of the business.

In my last article I discussed strategies for businesses during the Coronavirus crisis: the gazelle and the hedgehog strategies. When the gazelle senses danger it raises its head, looks around, and runs forward. At times it will change direction, but will always continue moving and keep its head up. 

We can be sanguine about the Coronavirus or be concerned or frightened – but we can't ignore the dramatic effect this crisis has on the global economy. In this article I don’t intend to give instructions like those issued by the government, about crowds and the like. I write about the business aspect, with all the issues you should deal with.

At the time Moshe was the CEO of Eyal Optics, and I was just starting as the CEO of Shamir Optical Industries. Shamir Optical and Eyal Optics had a complex relationship. On the one hand Eyal were our clients. We supplied them with glass molds for manufacturing plastic multifocal lenses, and they owed us a lot of money. One the other hand, Eyal were our "home lab".

We're nearing the end of 2019, have you prepared a work-plan (and budget) for 2020? Maybe you have a three-year or five-year plan? If the answer is no – this is the last chance to do so. And maybe you think work plans aren't necessary?

Many companies I have encountered search for ways to save "in the spotlight", meaning areas where it is easy to see and to attribute to a particular focal point in pricing – for example, purchasing, defective product, work costs or logistics. And an action whose objective is to strengthen employee bonds falls under Welfare and is usually considered a luxury, ending up being the first thing to cut.

If we address the 20% of principal products manufactured (see example later on), we can attain a significant improvement in results (eg. profits). In this way, we can concentrate our efforts and resources and be decisive and efficient.

Sometimes it seems to me that CEO's are afraid to confront management members who are not maintaining objectives. Instead of demanding a plan of action to attain the objective, the CEO herself explains to herself why they haven't attained their sales, production or other objectives.

The guiding principle behind our work leads a company to improvement and does not provide it with advice.  We work this way for several reasons: Firstly, we, as people, don't like to receive advice, and therefore, improvements in work methods that are obtained as external knowledge and not as a product of internal work, shall encounter opposition or will not be implemented in the long term.

Many companies wish to improve their performance and seek strategic advice as well as marketing or organizational development strategies, and when they receive advice, opposition emerges throughout the organization and ultimately this advice remains untouched in a book.

Thirteen important management principles to build a growing company and generate profit: A lecture in Prof. Dov Zohar’s seminar for MBA course at The Technion, Israel Institute of Technology.