Just Say No?
Believe it or not, turning down business can help your company grow.
Raj Khera hardly ever said no. Almost anybody who wanted a Web
site developed could call Khera Communications Inc. in Rockville,
Maryland, and be pretty sure Khera would take the job. "I
didn't like turning down business," explains the president
and co-founder of the 3-year-old company.
But no more. Last November, Khera began saying no to clients who
wanted personal Web sites. In fact, anyone not likely to buy $5,000
per year in services gets the nix. "Our larger clients are
repeat customers, and we can make more money from them," Khera
says, reasoning that marketing costs are identical for corporate
and individual clients.
Khera's actions have resulted in a 25 percent sales gain in
the first six months since he began rejecting opportunities that
didn't fit his new strategy. His success illustrates the power
of a new business benchmark called return on management, or
ROM.
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According to Robert Simons, the Harvard Business School
professor who first recognized and studied the concept, ROM aims to
give businesses the maximum benefit from one of their scarcest
resources: management time. A primary goal is to keep entrepreneurs
from being distracted from their core business by substandard
opportunities.
ROM is similar to financial measures such as return on equity,
but it deals with communication and focus, in addition to sales and
profits. Simons explains the concept like this: ROM equals the
amount of productive energy released, divided by the management
time and attention invested.
High-ROM enterprises include Microsoft, Intel and Automatic Data
Processing (ADP), according to a recent Harvard Business
Review article by Simons and graduate student Antonio
Dávila. At ADP, Simons says, a short checklist of tests for
sales potential, market share and competitive positioning guides
every new opportunity pursued. ADP's high ROM has helped the
database processing company post earnings gains for 35 years
straight, Simons notes.
Contact Source
Mark Henricks is an Austin, Texas, writer specializing in
business topics.
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