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Finding the Constraint in Your Business with Management Resources’ Rob Lederer

March 27, 2020

Taking leaders to the next level.

Rob Lederer is CEO of Management Resources.

Management Resources coaches and consultants provide knowledgeable and caring guidance, support, and structure to powerfully deliver results in the strategically most important areas of a CEO’s or business owner’s life: the business, the work you wish you were doing vs. the work you feel stuck doing, and your other personal goals.

Learn more about how Management Resources can help you run and grow your business by listening to this episode of The Thoughtful Entrepreneur above and don’t forget to subscribe on   Apple Podcasts – Stitcher – Spotify –Google Play –Castbox – TuneIn – RSS.

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Welcome to The Thoughtful Entrepreneur Show. I'm Josh Elledge, Founder and CEO of UpMyInfluence.com. We turn entrepreneurs into media celebrities, grow their authority, and help them build partnerships with top influencers. We believe that every person has a unique message that can positively impact the world. stick around to the end of the show, where I'll reveal how you can be our next guest on one of the fastest growing daily inspiration podcasts on the planet in 15 to 20 minutes. Let's go.

Are you with us right now? We've got Rob Lederer. Rob, you are the CEO of Management Resources on the web at management resources dot biz. Thanks so much for joining us.

Thank you, Josh.

So in a nutshell, what does Management Resources do?

Management Resources stall helps companies solve a problem that every company has. And that is, it helps fulfill we have a product, a management system that helps fulfill the untapped potential in the business. That untapped potential is different for every business. Every CEO, and usually every senior team leader knows and feels that their business has more can produce more it can do and they're not fulfilling their potential. And even high performing CEOs and senior teams know that. And they're already doing a lot of things to fulfill their potential, and yet their potential is still unfulfilled, and our management system helps them to fulfill that untapped potential.

So unlike management consultants, they'd come in and they'll do an analysis and then they'll kind of coach the executive team. So you take a different approach to that, is that right? We do.

So, we provide our management system provides a set of tools, insights and practices that helps the senior team and if they have the enterprise level management system, which engages the workforce The workforce as well, to identify where in business, what might be called the kink in the hose might be found every business is like a hose producing whatever it produces, and every hose gets a kink in it, and that creates upstream and downstream problems. And it also reduces flow through the hose. That's the unfulfilled potential that everyone's feeling. Except if you don't know to look for a kink in the hose of how the whole system of the whole system, you don't necessarily you're not necessarily going to find it, you're not going to find it by accident, no, in most cases. So for instance, one of our clients, this is a smaller client, we normally do business with companies doing five to 10 million in sales, up into double and triple digit millions. This company is a three and a half million dollar company, a Professional Services Association. They weren't even a product business. They did three and a half million in sales per year when when they met us and when they began integrating our management system. They had $233,000 of cash flow negative cash flow the year before they met us. That means they spent $233,000 to deliver products and services and deposit their collections deposit what they sold, they'd spent $233,000 more than they brought in. Now, why is that? There are lots of reasons Oh, can we should we grow sales? Should we cut costs to profitability? Should we be more efficient? And every company is figuring this out. Every leader is trying to figure this out every team is, but it's rather arbitrary. Where's the major bleeding? Let's fix that. What's keeping me up at night? Let me solve that. What's annoying me, let me solve that. What can I live with? I'll live with it. I'm managing some of these things down to a livable level. But that what that means is that the kink in the hose that's obstructing value creation and cash flow may never get found, because it's masquerading as an everyday problem and every businesses kink in the hose is different in this Company their kink in the hose. The management system flashed an arrow. It wasn't a real arrow. It's not software, it's a methodology. It's a it's a it's a way of doing things and we train our clients to do it. We provide the tools to do it and provide support for that. So their management system flash the metaphorical arrow saying looking at aging receivables, that's where your kink in the hose is to be found that's causing so many problems in your business unfulfilled potential. And they did some digging and they found that their sales people were routinely submitting purchase orders to billing two to three weeks late. So by the time an invoice was issued, it was already aging. Oh my gosh. Now no one needs to tell you to get your aging receivables down and no one needed to tell these guys either. So they got him down to a livable level before they met us. Yet they stay they were still this this still was where the kink in the hose was to be found. That was a big problem as unique to that business and it's unique to your business every business it's unique where the kink in the hose is. The next year they had $650,000 positive cash flow. This three and a half million dollar business but finding the kink in the hose had an own nearly a million dollar turnaround in their cash position from negative $233,000 spent more than they took in the year before to positive $650,000. That's cash banked Why? They didn't grow sales, their sales were flat, it was a $12,500 difference from year over year. They didn't cut their way to profitability, but they did end up reducing expenses because the extra cash flow, the impact of that constraint that kink in the hose cause so many upstream upstream and downstream problems of inefficiencies and problems and Miss handoffs throughout the company that appeared unrelated to each other and this is true for every company with every company's kink in the hose there they appear unrelated to each other and to a common cause. But the use of that cash, two to three weeks more cash times, what does that how many Emily weeks has left in the in the year at that point 16 weeks 16 cycles of two to three weeks 17 to get to use that two to three weeks of cash that many more times in the year caused so many efficiencies and cost reductions that that's where the cash came from. They didn't know where to cut costs. But by becoming more efficient by finding the kink in their hose and solving it, they ended up becoming highly efficient. And that's where the money came from.

And Rob, how did you get into this line of work? And then how did you start your practice? And so obviously, you've done very well. You've been in the inkless yourself. So congratulations on that. Thank you.

Thank you. Yeah, I've been on I came from a family business. I grew up in a family business, and that was a four Time Inc 500 winner. And we also want ink magazine's other Inc 500 at the time, the inner city 100. And going through that kind of crazy explosive growth is quite a learning experience. From that I ended up creating a business to help other fast explosive growth business owners manage rapid growth and change, help to run their businesses better and to grow in their own proficiency. There's sort of a classic CEO coaching and, and, and small business consulting practice. But over the years, that was not scale I found that was not scalable as most consultants and coaches do. And I was interested in a bigger business. And I, I was an entrepreneur who, who loved who loved helping other entrepreneurs, how other business owners do what they do, but I didn't have a product or service that I particularly wanted to bring to market. Fortunately, I was introduced in 2007, to the inventor of our management system, who while he was an inventor was no entrepreneur. And so I was an entrepreneur and look looking for a product and he was an inventor looking for looking for a business. And so we were a match made in heaven.

And until you had mentioned that you come in to come from small business background Is that right?

That's right. So small to mid size. I mean, our Yeah. When I helped scale our family business, we were in a five year period, we went from 90 to 450 people, 9 million to 42 million in sales, it was, you know, is a lot of growth.

When you, let's say you look at a typical small business, knowing what you know about your management philosophy. Where would you say most businesses could probably stand to improve?

Well, as one of our advisors puts it, a little unkindly but but with a with too many grams of truth, the kink in the hose sometimes can be found between the CEOs ears, and I, it's true for me as a CEO and my business it's true for all of us and sup to some degree. In my in my days, coaching many, many different business owners I learned that the the fundamental, a mantra or practice one should do is to look at look at one's work as a two sided coin. On the one side, the only the only way. On one side, I am the bottleneck to my own growth. And on the other side, the only way to grow my business is to give my work away. So I'm the bottleneck to my own growth, because I'm holding on to holding onto too much. But the only way to grow my business is to give my work away, especially where I think I can't do it. Because otherwise, I'm the bottleneck there. And so, actually, our management system was it was a perfect complement to that because it recognized that the CEO can't be the only problem solver, even and sometimes the senior team can't be the only problem solver. Finding problems is actually a group effort. Sometimes it's not just how smart you are. It's not just your expertise or your experience. It's not just being Good analyst. It's also about talking to the different people and getting from them where the different problems and opportunities in the business are and having a way to do something about it. So our management system is a way to systematically elicit from the senior team and in the enterprise level one also from the workforce to crowdsource, if you will, where the problems in the business are and, and their methodology helps to distill that down to where the kink in the hose might be found among those. And by focusing people on finding the kink in the hose as opposed to fighting fires all the time. They're focused on the right thing, because that's responsible for so many of the fires happening in the first place the kink in the hose, so to find that constraint in the whole system, and have a way to have a way to find it systematically that engages your senior team and engages your workforce to focus everybody on the same biggest, most important most most consequential Cause for inefficiencies in the business, as opposed to guessing it. I saw this as a golden opportunity to provide to other business owners. That's why I partnered up with our, our inventor.

And when you when, when Management Resources launched, how did you get your first handful of clients and how have you been able to scale maybe beyond other people who might be in this industry?

Sure. So, you know, there's, there's a consultants are sometimes really loved by their clients, and a lot of times just tolerated and, and too many times, consultants are kind of dismissed or or, or not not really respected for what they do. And there are a lot of good reasons for this, which I won't get into now, but it does mean that an important part of the ecosystem Supporting the success of a business or business leader is sort of a second class citizen. And there are there business owners, entrepreneurs, and there are consultants and they're not really seen as the same thing, even if the consultant has a business. Fortunately, I kind of sidestep this issue with our business because once we stopped being a consultant firm, a coaching firm and became a product business with a management system, well, it looks a little bit like consulting. It isn't because it's a repeatable product with repeatable training and repeatable support that and with repeatable practices, it doesn't require my expertise per se, or anyone elses on my team. So the way it gets outside of consulting the way my business goes out from outside consulting, outside of consulting is that there's no particular expertise required except expertise and setting up and configuring our management. system and a company, right? It's a facilitated process. And so we train and quality assure the performance of our facilitators or we have client relations management. It's not unlike any RP installation, which I hesitate to mention in the same breath because he RP installations suck and everyone knows it. No one has a good story about the RP installations, we are not that it's like we do the first part, interviewing the senior team and configuring our system like an earpiece system would without that awful, awful middle part of of any RP rollout, because we're not a software system and it's not in the RP system. It's a specific management system that has specific, rather simple practices month in month out lather, rinse repeat each month, and and the business will get the performance improvements that are promised by the management system, use the management system, lather, rinse repeat each month. And breakthrough performance happens and gave you a really good example with company to spoke about a little while ago, of a company that did lather, rinse repeat each month founder found found the first major constraint in the business because they've always be another after it's solved. And after a while another kink occurs in the host. But they found their kink in the hose that was the man with the management system was designed for. That's a repeatable process. It's not a consulting solution. And they got a million dollars turn around in the three and a half million dollar revenue business.

One thing that you have pursued is a certified B Corporation. Why did you do that? And is that good for business?

Yeah, so thanks for asking. Because I care very much about being a B Corp. We're actually a founding B Corp where the 60 s B Corp there now. How many worldwide 3000 maybe more I lose track in 2007 when I was introduced to the inventor of our management management system was a consequential year and a consequential conference for me because that's where I was introduced to that The inventor but also that's where that same conference was where B corporations were introduced to the world. The first 10 big corporations were on stage as a dog and pony show to attract the rest of us. So I saw a five business owners who were friends of mine five, who would businesses I'd heard of and respected that are social and environmental, have social and environmental missions in addition to their financial mission, which my business has been committed to from day one. And because my values were so consonant with B Corp values, and I saw people who are up on stage, saying we're leading the way and I didn't know exactly what they were leading the way for, but I said I'm right behind it. And so we've been recertified as a B Corp every time since 2007. Our first certification hasn't been good for business. We're B to B business. I think B corporations are from a reputational perspective. The bcl the circle B. bug is better for consumer products. So I think that's more of a be the seed benefit. So I wouldn't say it's been good for business, but it has, it does open the door to conversations that I wouldn't necessarily get does get the listening of other CEOs and senior team members in a different way who have the same values, who share the values that that we have as a company to to actively make the world a better place through business. And, and so it's, it's, I can't quantify it, but it's certainly it's been a good social lubricant in the b2b world. It's just not got the same attractive qualities on a on a retail basis that for b2c company it would have

So Rob, what is the best way for people to kind of begin their engagement with the work that you're doing?

Sure. So, you know, one of the one of the things, one of the things that a company can do to get what we're talking about if you really wanted to I know what I'm talking about about the kink in the hose. If that sounds that sounds kind of plausible or really right on but you don't know what to do about it or how to find it or how to think about or how to talk about it. There's a wonderful book, not that's written like a mystery novel. It's kind of a thriller, called “The Goal” by Eliyahu Goldratt G O L D R A T T, and it's published about 1980. And it's one of the best selling business books ever. It's been translated into many languages, 10s of millions of copies have been sold. This is still a best seller. And the goal introduces something called the Theory of Constraints. And this many people in business schools have read this. Many people outside of business schools have read this, but they don't have a way to operationalize how to address the constraints to be found in the business. The constraint is what I call the kink in the hose. It's the it's the thing. It's the problem that's constraining value creation, throughput and cash flow in a business. That thing that's constraining peak performance. So instead of trying to improve what you do, it says, Let's go find what is inhibiting our peak performance and go rid ourselves of that let us solve what is inhibiting us from peak performance, so that we can naturally flow better, faster, and more and make more money. Yeah, that's the kink in the hose is the constraint. And that book introduced the Theory of Constraints. And you can read it like it's like it's a fun mystery novel yet. It's about business.

Yeah, I think anyone if you do a quick search on Amazon, you'll see the cover you've got Yep. I've seen this book before.

Yeah. And you know, they people see this book, but rarely does anyone when I say, Oh, the goal? Oh, yeah, I think I've read that. I think I've heard of that. I like the Theory of Constraints. Oh, that's right. What are you doing to what do you can you tell me about the Theory of Constraints most people still can't tell you about and when they can tell you about it. I pursue this. It's like peeling back the onion. When I could tell me about it. I say what do you Since since you love it, because they do when they when they can tell you about it, they love it. What are you doing about it? You have a systematic way to find the constraint in your business? And the answer always, is no. And that's what our management system does is it provides a systematic way to always find the constraint and do something about it to remove what's inhibiting peak performance in your business.

Excellent. Well, Rob Lederer you are the Founder and CEO of Management Resources on the web at management resources dot biz, I want to thank you so much for your time today.

So I was thanks so much for having me really appreciate it.

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