Run Your In-plant Like A Business

Run your in-plant like a business. How often have we heard those words of advice? It's become a mantra for in-plant managers. But what does it mean? How does one run an in-plant like a business?

One place to start might be to think about what defines successful businesses. What makes them great? And can you do the same types of things in your in-plant?

Equally important to understanding how to run your in-plant like a business is knowing why you should do so. To better understand that, let's first revisit the reasons in-plants exist.

In-plants are direct descendants of Henry Ford's model of vertical integration, where organizations controlled all of the components required to produce a product or service. There was a time when in-plant managers were much more highly valued by their organizations. To be successful, an in-plant needed only to provide a quality product efficiently and on time. In-plant managers were secure in the knowledge that they filled an important role in the organization. Life was good.

Somewhere along the way things changed. In the 1980s, authors Tom Peters and Bob Waterman studied the characteristics of successful companies. Companies that "got it," they observed, were those that identified things they did really well—their core competencies—and focused on them. They learned to "stick to their knitting." Functions that did not contribute directly to the perceived purpose of the organization were to be outsourced.

Boards of directors, boards of trustees and elected representatives began to take a hard look at budgets and question expenses that seemed unrelated to the core purposes of the organizations. Functions like printing, facilities and food services came under scrutiny. In-plant managers found that being the low-cost producer, or the fastest or producing consistently high-quality work wasn't enough.

Running your in-plant like a business requires the same focus that Peters and Waterman found in successful companies, and more.

One way to think about running your in-plant like a business is to think about the characteristics that lead outsiders to the conclusion that we are, somehow, missing the boat; that we're not running our shops like businesses. I'd like to suggest three areas that are important to address in this analysis:

• Financial management
• Customer focus
• Marketing

Financial Management

One area in-plant managers sometimes overlook is financial management. Here are some questions to help you frame an analysis of your own financial management prowess:

• First, do you understand your complete financial picture?
• Do you know your costs? (All of them?)
• Do you know the value of the space you occupy?
• Do you know the costs of your supplies? Of your utilities? Of paper?
• Do you know the costs of labor, including internal administration (yourself and other non-production staff)?
• Do you know how these costs compare to those of the commercial printer down the street?
• Have you calculated a fully loaded hourly rate? (Do you know what one is?)
• Have you analyzed any per-unit rates to assure that you are recovering all of your costs in those areas?
• Can you show the return on investment (ROI) on your equipment?
• Can you read your organization's financial reports and understand how your unit supports or detracts from the financial position they reflect?
• When you request additional equipment, do you build a strong business case and base your justification on a cost-benefit approach, a break-even analysis or some other economic basis?

The fact is, many if not most of the facilities management (FM) firms and outsourcing initiatives are cost driven. Facilities managers and consultants sing loudly about how their organizations will provide services that are better-cheaper-faster.

Sound familiar? It should. They're going to argue to your chief financial officer (CFO) that using their services will reduce cost and free capital for projects more closely aligned with the organization's core purpose because they're profit driven and therefore less wasteful and more efficient. And they're going to use data to support their claim.

A good example of this is an ad that ran in a recent issue of Fortune in which a large copier/facilities management company claims to have saved a client $1.6 million when it "assessed and streamlined their company-wide processes and printing needs." It's hard to argue with numbers like that, and it's especially hard when you're responding to a request from upper management after the FM has made its pitch.

From the financial perspective, running your in-plant like a business means staying in contact with your CFO and regularly providing the information that he or she wants. It means understanding the complete cost picture of your shop and setting and meeting goals to improve your financial performance. It means understanding the costs of printing acquired from commercial shops and using that knowledge to build a system to track and report savings on the work you do in-house.

It means working hard to make sure everyone on your staff is aware of all the implications of waste and inefficiency, and rewarding good performance when they do something that reduces costs. Understanding the financial side of your operation is the first step on the path to running your in-plant like a business.

Focus On Your Customers

The next area of strategic concern for an in-plant is customer focus. Companies that "get it" are driven by customer service. We've all read the books or attended the presentations telling us to provide "knock-your-socks-off customer service." Peters and Waterman called it staying close to the customer. They argued that customer focus meant understanding customer preferences and catering to them.

Our colleague Mike Renn, assistant vice president of Mellon Financial Corporate Services, put it nicely during the panel presentation we shared at the recent In-Plant Graphics Conference. He said, "You have to help your customers to be successful." In short, we have to add value for our customers.

One problem I see frequently—and I've been guilty of it myself—is that of really understanding who our customers are. I remember when I was developing my first business plan at the University of Louisville, I identified our customers as "...the faculty, staff and students..." at the university. The truth is, faculty, staff and students were our customer base, but within that base there were offices, groups and even individuals who used our services more frequently than most, and this is the group we needed to recognize.

Here are some questions to help you assess your customer focus:

• Do you really know who your customers are? The Pareto principle tells us that we should expect 80% of our work to come from 20% of our customers. Do you analyze your production or billing reports to identify your 20%?
• Do you go out of your way to understand what success means to your top customers and how your shop contributes to their success?
• Do you meet with them regularly—not just when they bring in a job or call to complain—to share your plans and inquire about their plans?
• Are you both going in the same direction? How do you know?

Running your in-plant like a business means focusing on your customers, really understanding their business needs and planning for your operation to provide them. It means making their success your primary goal.

Market What You Do Well

The third leg of our business model, and one that goes hand-in-hand with our customer focus, is marketing. Marketing is more than an open house, e-mails, flyers or a cool Web site (although those things are important). Marketing is about identifying what you do well and then telling people about it.

Think about the question I raised in the customer section—do you know who your customers are?—and reverse it: Do your customers know who you are? Do they even know where you are? Do they know your capabilities? Do they know that you have that neat new piece of digital color equipment and why it should be important to them? Do they know who to call for help in selecting paper, getting a design or picking colors?

Your marketing effort should be framed around an analysis of what you do, whom you do it for, and where they would go if they didn't come to you. You might start with a SWOT (strengths, weaknesses, opportunities and threats) analysis performed by you and key members of your staff. A SWOT analysis provides a snapshot of where you are. As a next step, ask some of your key customers to review your SWOT results. You may find their perceptions to be different from your own.

The results of the SWOT analysis will guide you as you develop a marketing plan. Once you know where you are, you can decide where you want to be. The marketing plan is a series of goals and action steps to get you there.

Was one of your opportunities to be more visible? Develop a program to let people know who you are and what you can do. Did people complain about your paper selection? Expand it. Are you taking too long to complete orders? Study your processes and look for ways to reduce cycle time. Are your prices too high? Do your own price comparisons and share the results with your customers. And most importantly, be sure to tell your customers.

Marketing is about more than promotion, although promotion is important. Marketing is about understanding your customers' needs and positioning yourself to meet them. It's about understanding the market you compete in and the strengths and weaknesses of your competitors, and then positioning your in-plant to provide the best value to your organization. Marketing is about building a brand for your shop within your company, association, college or branch of government based on your strengths and successes.

Remember, running your in-plant like a business means always knowing where you are, focusing on your customers and building strategies to help your customers succeed.