"Sales feed egos. Margins feed families."

group_photo.jpgI read a nice story in Crain’s Small Business today about Scott and Mitch Silver, and their marketing firm Printable Promotions, in Chicago.

The piece outlines why the Silver brothers abandoned managing “activities” through their org chart hierarchy, in favor of a flat, employee-empowered strategy that they’ve dubbed, “managing by objectives.”

This is the second time Found|READ has addressed the virtue of weighing Outcomes vs. Activity. It is a subtle discipline, but based on how it helped Printable, you might want to try it, too. As Scott tells Crain, it works because: “Sales feed egos. Margins feed families.” (Just look how happy his staff is!)

According to Crain, in Printable’s early days, when closing sales mattered most (as it does at all startups) Silver’s 15 employees were reviewed based on activities like “did [you] call all these customers to follow up on the fact that they owe us money?”

Notice: the criterion was ‘did you follow up,’ NOT ‘did you get the money!’ Sales are an activity. The margin is the ultimate result of the activity.

Scott tells Crain that managing activities this way

“[created] a lot of internal inefficiencies, with all sorts of back and forth. If there was a problem, sales would look into it, then production, then I would, then it was back to accounting for a discount or to fix it some way… once we started to reach critical mass, there weren’t enough hours in the day for us to be part of it.”

So in 2006 the brothers switched strategies to focus on the results of the activity, not the activity itself.

For example, instead of “following up” the goal became: “I will acquire five new clients” or “I will keep my profit margin at a certain level.” Or, for the non-sales people, something like, “I will collect 85% of our receivables within 60 days.”

Then, to alleviate management’s need to oversee everything…

…the Silvers empowered their staff to make decisions, as long as they could answer ‘Yes’ to 5 questions:
1) Is it right for the customer?
2) Is it right for our company?
3) Is it ethical?
*4) Is it something for which you are willing to be accountable?
5) Is it consistent with our company’s basic beliefs?

We emphasize #4, because we think is the most important: Printable’s employees now set their own goals, and it’s up to them to figure out how to reach them. This includes personal goals, like quitting smoking. Why?

“It’s more about principles than tactics,” said Scott. “The idea is goal-setting is for your whole life, making you a more complete person,” Scott emphasized.

A more complete person is a more complete team member. This is how focusing on results, rather than activity, has transformed the Silvers’ business. According to Scott: “[We used to have] 50% of sales people meeting their goals. This quarter, I think everyone is going to hit them.”

For more on why results matter more than activity, read Chris Michel’s earlier Found|READ post:Outcomes vs. Activity. Chris knows a lot about this. He founded an early social networking site, Military.com in 1999, sold it to Monster.com in 2004 for $40 million, then founded Affinity Labs, which he sold to Monster for even more — $61 million — earlier this month. Talk about outcomes. Congratulations, Chris!