The Five Essential Types of Communication – A Lesson for Finance Leaders From Ops and Supply Chain
“What we’ve got here is failure to communicate.” In the iconic movie Cool Hand Luke, Paul Newman’s character was sent to prison and eventually killed because of a failure to communicate. In business, the results of weak communication shouldn’t be that drastic, but without communication, it’s easy to miss important opportunities to innovate and improve. Within operations and supply chain, there are five essential types of communication:
1) INTERNAL COMMUNICATION: WHY?
Last year a significant opportunity suddenly appeared for a client. We met to develop an action plan that involved major changes in how the company did business, changes that needed to happen right away to exploit the opportunity. At the end of the meeting we had a plan in place and everyone in the room bought into it completely. No one else in the company even knew this meeting was taking place, so after a certain amount of self-congratulation on the excellent new plan, I interrupted to ask, “How are you going to tell the people on the shop floor?”
Judging by the silence that followed it was clear that there was no plan for communicating the action plan. If you don’t know how to tell your employees the how, what, and why about potentially earth-shaking changes, the changes simply can’t happen.
In this type of situation, top management has been through the process of carefully crafting a plan for improvement, and they have already answered the important question, “Why are we doing this?” Employees, however, weren’t in the room during the discussion, and a sudden change may seem a bit mysterious to them.
Answering the question “why?” is essential to bringing everyone on board; without that answer you are asking people to just follow orders. They will, at least for a while, but to remain motivated people need to understand why they are doing what they’re doing.
2) COMMUNICATING WITH SALES: PLANNING TOGETHER
I can’t overemphasize the importance of communication with sales. When I was VP of Operations at a manufacturing company, my production managers did the planning. I required them to meet with their corresponding sales manager every Monday morning to convey the past week’s results and to update the forecast for the coming week and month. Sales managers know if a major retailer is planning a sale, or if they’re about to get a really big customer. Communication with sales offers operations a glimpse into the future.
Likewise, sales needs to know what operations is doing. Are machines breaking down? Are there labor problems? Currently I have a client with 180 positions, 30 of which are vacant because they can’t find qualified workers. That has a tremendous impact on output, so communication is key. If you plan ahead and communicate, you can enjoy sales growth without the growing pains. Read up on the 13 Insights CFOs Should Know About Marketing and Sales.
3) COMMUNICATING WITH SUPPLIERS: PARTNERSHIPS FOR SUCCESS
Communication doesn’t end at the front door – we also need to communicate with the supplier base. At my former company the buyers visited our top 10 suppliers twice a year, and those 10 suppliers visited us twice a year, so we came face to face once each quarter. A client of mine, who has one buyer, keeps running out of inventory and the buyer refuses to talk to the suppliers, even on the phone. How can this buyer possibly know what’s happening or what’s coming down the pike?
Externally, suppliers need to receive not only a performance report, but a quarterly review session to examine new opportunities, cost and lead-time reduction activities, etc. In addition, annual supplier meetings should inform suppliers of planned new products and other opportunities for them to grow their business serving your company.
Communication is the foundation of partnerships, and regular communication is vital for success. Supply chain personnel need to get in touch with suppliers for more than just placing orders. How about improving performance by…
- Sharing forecasts and plans
- Discussing production issues
- Asking what’s new in the supplier’s world (a great way to learn about new technology and better product options)
new in the supplier’s world (a great way to learn about new technology and better product options)
Start communicating with suppliers early in the design phase. Many companies carefully protect their technology R&D, cloaking it even from their “trusted” suppliers. If you can’t trust your suppliers, you need new ones. If you do trust them, bring them into the design process early so they can prepare their capabilities to produce what you’ll need. Do you have more supply chain terms we should know than are listed in this article, The Top 15 Supply Chain terms that every CFO should know
4) DEFINING SUCCESS TOGETHER
Both internally and externally, all parties must set expectations. What are shipping lead times? How are they measured? What are the specifications for materials and product performance? Are there sales forecasts? How and when will payment be made? Do both parties define success in the same way?
Recently, I visited a client’s supplier and discovered that the supplier didn’t know what the inspection points of the product would be, so they had no idea what the critical performance criteria were. They simply did what they thought best and hoped it would be good enough.
I then visited a client location and found that what they defined as product failures “worked fine” when they were returned to the supplier. It turned out that the two parties were measuring performance differently. This caused big delays in resolving the issues and hard feelings on both sides. Had they defined success together from the beginning, this could have been avoided.
Communicating expectations and setting common performance measures are part of establishing strong supplier/customer relationships.
5) COMMUNICATING WITH CUSTOMERS
Too many companies fall into the trap of only talking to customers when they place an order. Be in touch. Ask what’s going on. Is business up or down? Are there any new opportunities to be of service to them? Customers can provide vital input to product development, supply chain design and capacity planning.
Clear, regular communication is like having a crystal ball on your desk. It gives you a peek into the future of your business, your suppliers’ business, and your customers’ needs, enabling you to plan effectively. The relationships you build through communication allow you to exploit opportunities when they arise and quickly identify new opportunities. A plan for internal and external communication is easy to create, and following the plan can be as simple as picking up the phone.
Is your finance team communicating effectively within these 5 dimensions?
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