Sixty-three year old Coach Lou Holtz was coaxed out of retirement in 1998 to turn around a struggling University of South Carolina football program. When asked January 1, 2001, his secret for turning the winless 1999 team into the 2001 Outback Bowl winner, Coach Holtz simply replied, “We went back to the basics.”

Is 2003 the year you and your organization needs to get back to the basics?

In our rapidly changing, noisy world, it is easy to overlook the basic principles and practices that served as the core competencies of our initial business, professional or personal success. For example, can you or your management team answer these five basic questions?

• Do 20% of our customers contribute 80% of our net profit? If yes, who are they and are we treating them properly?
• Do 20% of our products or services contribute 80% of our net profit? If yes, how should we exploit this knowledge?
• Do 20% of our activities consume 80% of our overhead costs? Do they add value to our customers?
• Do our top ten most costly, time consuming activities support our mission statement? If not, which is wrong, the mission or the activity?
• If the economy softens, do we know beforehand which activities or processes we would reduce or redeploy to meet our profit goals? If not, are we simply going to revert to the destructive practice of an across-the-board budget cut?

The American Management Association (AMA) recently reported that the “lack of profitability understanding is like the elephant in the boardroom that no one wants to mention.” One mid-level manager interviewed by the AMA stated, “You’d be amazed at the lack of P&L knowledge in the executive levels of my company. It is difficult for some to admit that they don’t have these skills. Out of embarrassment they avoid P&L impact analysis or fail to ask the important questions when evaluating everyday business decisions.” If this deficiency of basic knowledge exists in an organization, management will lack key answers to pressing problems primarily because they haven’t learned how to ask the five previous questions.

How do we get back to the basics? How can we put ourselves in a position to answer the five cost management questions plus others? Author Daniel Tobin proposes five basic principles to consider in his book Re-Educating the Corporation:

Principle #1: Everyone needs to learn ABM
Tobin says, “To have a top executive say that the people who work for her need to learn, but not acknowledge her own need to learn, precludes this principle.” Leaders are the “lid” when it comes to improving profit. If leaders understand ABM, then employees will follow and raise their knowledge and performance levels.

Principle #2 Employees learn ABM from each other
Adults learn best when they are asked to teach someone else. I remember the first time I was asked to substitute teach a Sunday School class. Because I was inexperienced, I spent hours and hours preparing for the 45-minute class. The result … I learned a lot and so did the class. Managers can use staff meetings and or other means to teach and learn the principles of Activity Based Management.

Principle #3 Learning ABM enables change
Tobin says, “Openness to learning helps people recognize the need for change. As people learn, they discover that there are often better ways of doing their jobs.” It is very common to see employees offer product and process improvement ideas during ABM training sessions.

Principle #4 ABM Learning is Continuous
Just as continuous improvement is a hallmark of Total Quality Management, continuous (or lifelong) learning is a hallmark of an improving organization. Ritz-Carlton Hotels stamp out defective service by providing every employee 15 minutes of training every single day.

Principle #5 ABM Learning is an Investment, not an Expense
Traditional accounting systems classify people as an expense, not an asset. Yet for most organizations today, employees are their most important asset. ABM training expenditures are capital investments that will result in rapid and repeating returns.

Basic training need not be boring. ICMS offers you innovative, entertaining and results-oriented training options:

Option #1 Principles of ABM Boot Camp
This action-packed three days is filled with 90-minute training sessions followed by application of the ABM techniques in an actual department. You hear, see and then do. For the agenda, go to www.ICMS.net and click on Training.

Option #1 Train-the-Trainer
ICMS can put together a combination of our ABM books, CD-ROM’s, posters and coaching sessions to train-the-trainer of your organization. ICMS takes great pride in having made ABM understandable for all employees, especially the non-financial employee. 

It takes a storm to test the strength of a foundation. After the 1967 season, the entire University of South Carolina football coaching staff was fired. On that staff was an assistant coach named Lou Holtz. After losing his job, Lou’s wife bought him a book titled The Magic of Thinking Big by David Schwartz, Ph.D. The book caused him to test and define the basic fundamental truths of his life. With a solid foundation in place, Lou looked to the future by preparing a list of 107 personal goals. Coach Holtz has accomplished 95 of those original goals, including a return to the university that fired him. Using his “back to the basics” methods, Lou took a winless team in two years to a winner! Is there a storm approaching in your personal or professional life? Make 2001 the year you and your organization get back to the basics.