Wednesday, April 29, 2009

More to Life (in Business) than Deals.

Yesterday morning, I received an unexpected phone call from a former colleague I haven't spoken with in about a year. He wanted to talk about the planning exercise I ran at his company through a few years ago, and he opened our call by shouting: “I got it!”

My caller friend, you see, was one of the top performers at a high-flying financial services firm I did a project for. The planning exercise encompassed all aspects of business strategy and organizational construct. Mind you, my caller friend (like most in the room at that time!), thought the project was utterly useless. In the go-go days of 2006, I vividly remember him saying: “Who needs this stuff? All we need to do is deals. That’s it, just do deals…that’s what we live for…everything else is just a waste of time.”

Fortunately, his company ownership and executive management recognized there was more to running a successful business than a series of transactions and so they instituted measures that have served them particularly well to this point.


As the economy has melted down, their company is more than holding its own. In fact, the gentleman who called me this morning was so put off by the organizational changes being made back then, never accepted there was anything more to life than deals, left the company to start his own venture.

The true purpose of his call yesterday morning? While he and his partners had done pretty well they were now really struggling and he thought about it, and NOW they’d like me to do a project for them. Yup, that same comprehensive strategic planning exercise he had "no use for" a few years ago s now something he really does need after all. To me, this is the best sign that the global economy is heading back in the right direction!

Monday, April 27, 2009

SCH's Edward Lampert Looks for Normalcy in an Abnormal Business Environment

I just can’t accept that the vast majority of business professionals I run into these days believe that today’s economic environment is normal. I have a hard time believing that these people have not read a newspaper, looked at a declining investment portfolio or a 401(k), or that their companies have not been even slightly jolted by the worst financial conditions in anyone’s memory (or longer).

Given all this, I have enormous respect for other credentialed professionals and their great command, knowledge and skill, but most people’s functional expertise, their industry expertise, and their range of experiences tend to be most suited for normalcy.

My particular industry-interest, if you will, is Volatility. There aren’t many of us out there who have this expressed interest and I invite another business to take advantage of someone who produces results in these circumstances as a matter of routine. I offer a track record of achievement in “undermining volatility” across a range of industries for a quarter century. My normalcy is high achievement when there is abnormalcy.

On that note, I was completely inspired by Edward Lampert’s incredible annual letter to Sears Holdings Corporation (SHC)’s shareholders earlier this year (you can read it here on Scribd.com). He told it like it is and did not pull any punches. Perhaps that’s why Mr Lampert is who he is and why SHC is likely to overcome its challenges…as long as his organization can truly respond to his challenges and execute in line with his directives. In his letter Mr Lampert invites those who believe they can contribute to SHC’s success to contact him. At the exact time I was reading this I was also having my own Sears experience as a consumer, and it got me thinking:

I live in Connecticut, but we also have a NY condo I stay at 1 or 2 nights a week to cut a 1 ¼ hour commute into 18 minutes from Manhattan. My daughter is getting her masters at Columbia University so she is living at the apartment fulltime. Unfortunately, sometime in December one of us broke the microwave oven…which was originally purchased from Sears. She called Sears service to have a technician come and repair it…service is one of Sears’ greatest value points.

For 6 consecutive Saturday’s Sears arranged to send a technician to the condo. For 6 consecutive Saturday’s they called mid-afternoon to inform her the tech was too busy and would be unable to make it to the apartment. So already the Sears value proposition is undermined.

On the 7th Saturday the service guy came, looked at the microwave and said it would cost $450 to fix. Clearly, a dumb idea to spend $450 to fix something we could buy for roughly the same amount. So the technician gave her coupons, one for $75 that could be applied against a purchase of a new microwave from Sears to offset the cost of their service call, and the other a 20% coupon to buy a new appliance. I picked up these coupons when I stayed at our condo last Wednesday (3/4). On Saturday 3/7 my wife and I went to the Sears store in the closest mall to our house in CT.

The store clerk was a very nice and helpful man, but when he saw these coupons he had no idea what to do with them. He acknowledged we could only buy an appliance in their store (not from a Sears service technician), but said he didn’t think the store could honor these coupons because they came from service. So he went and got his manager who was equally perplexed. That manager brought over another manager and the 3 of them, along with my wife, spent the next 45 minutes or so trying to solve this incredible problem…which they couldn’t (the best suggestion was: buy a microwave in the store, then send a letter to corporate attaching the coupons and hope they would send us a rebate).

Now, mind you, this was taking place at the exact same time Circuit City—with a store ¼ mile away—was liquidating their inventory, including microwaves. And since every other store knew people were going to buy Circuit City going out of business merchandise many were offering “we will match any Circuit City price” or other discounts. Sears? They chewed up my time and couldn’t figure out how to handle their own coupons from a couple that was intent on buying only from them!

This all brought me back to the concepts of normalcy, abnormalcy, volatility, and Mr Lampert’s stated intentions. A typical employee who wants the job, needs the job, will do anything and everything (s)he can to never let stories like my Sears service and shopping experience surface because the potential for getting “in trouble” far outweighs potential gain for fixing problems. I submit that Mr Lampert (in fact for anyone else serious about winning in the disturbed business climate) will find the talent he seeks by recruiting professionals that bring the added benefit of not caring about politics, turf, CYA, or anything else a traditional employee is most conscious of. He wants people up to his challenge, with a track record of results, with transferrable skills AND one who won’t let the typical bs get in the way. From my own experience, the professionals he seeks are looking to achieve greatness, not find jobs.

Looking at the Big Picture of Business Today: Stupid is As Stupid Does?

In today's business environment, I don't know if "the big picture" overshadows the smaller one, or if it's the other way around. But I absolutely know they are of the same landscape. Even in its current first draft, when the history of this era is written they will report some astonishing (connected) story lines:

1. An era where professional athletes turned to steroids as a way to put up some big short-term numbers.

2. An era where the financial community went against all logical and accepted practices as a way to put up some big short-term numbers.

3. An era where the federal government initiated a war and engaged in unprecedented activities like Guantanamo Bay to meet their short-term objectives.

4. An era where a law and order crime and punishment DA cum Governor can build a career on straight & narrow ethics yet get run out of office for hanging with hookers.

5. An era where gambling replaced drinking as the biggest vice on college campuses.

6. An era where people knew they could not afford houses they were "buying," but were unconcerned because in 2 years (or less!) they could sell that house and turn a huge profit.

7. An era where lip syncing was introduced for "live" concerts to assure a better quality performance.

The list of find-the-easy-way, short-term thinking, it's only a lie or a scam if I get caught, and so on, examples can run for many pages. How did this all suddenly happen all at once? Did the "Big Picture" set the wrong example, or did a conspiracy of small individual acts conspire to just lower everyone's tolerance and expectations?

To me, politics has also been on this steady march to absurdity for well over a quarter century, but the defining moment remains the poll question that really did decide the 200 election: "Who would you rather have a beer with, Al Gore or GWB?" At the same time, people treat their obligation to vote on programs like "Dancing With The Stars" or "American Idol" well, as pretty serious business.

On the heels of Enron, Worldcom, Global Crossing, Tyco (remember those?) and many others we didn't get reform or better run businesses. Company after company studied what those companies "did right" to boost the stock prices and then also tried to learn what they shouldn't do. Effectively, the latter was studied for "how not to get caught" as opposed to behaviors that should be eliminated.

On a micro level, I always ask the same question of every executive I meet: "Who is your customer?" At best the typical answers are stock, not well thought-out or overly insightful; in the worst cases these executives show utter disdain for the markets they serve. Is it any wonder then that employees throughout the ranks are confused, misdirected, or unable to execute very well at all? If business leaders are not deeply in tune with
their markets, with their prospects and customers, does anyone think a company can meet, let alone master, rapidly changing competitive and economic conditions?

Forest Gump and his mama shed light on all this: "stupid is as stupid does". I'll interpret this as meaning one need not be perpetually stupid because doing better tomorrow is always a redeeming option. However, excelling tomorrow means confronting the realities with logical and decisive action. Fundamentals rule, they always have and they always will. The smart leaders will take the initiative to focus their companies on the fundamentals that are always produce results.

Thursday, April 16, 2009

The purpose of a business is to turn a profit - you ?

I finally found time to read an interesting article that was passed along to me earlier this month by my colleague Josh Hyman at Empire Surgical called "Social Intelligence and the Biology of Leadership." The article was published in the Harvard Business Review last year (September 2008).

Now I must admit
HBR’s stock sunk way down into a black hole for me when they couldn’t go more than 2 issues without writing some piece in high praise of Enron back-in-the-day. It’s more than being a revisionist historian on my part…HBR was Enron’s biggest cheerleader, they bought the whole “these guys are the smartest people in the world and are single handedly going to change the way business is conducted” nonsense without ever once offering critical analysis. I expected better from them and to my knowledge they never set their record straight on this.

So perhaps with a little bit of this still gnawing at me and recognizing it’s hard to really argue with the central points in this particular article, I still found it somewhat lacking because it read too simplistic to me. The article is written from a single point of view, in almost an antiseptic vacuum because it does not take into account the full range of contributing factors and stakeholder analysis. Let’s start with their subject Janice. Please don’t tell me that her interpersonal awkwardness only became apparent after she was promoted! We can only speculate on the actual reasons why she was promoted (though I can assure you it’s not what they portray) and based on the way this reads it also would appear that the company did very little to cultivate her leadership capabilities before she was promoted. Like many, she adopted a mentor after blowing up in the job. How many times do we see this? Preactive versus proactive versus reactive management; the fact her company evidently practiced the latter when the ideal state is the first (preactive is to anticipate well before) leads me to one question: who screwed up, Janice or the boobs that promoted her when she was not ready for the job?

Once the stock market became liberalized, when every bus driver and sewer worker (we’ll call them Ralph and Ed) moved on from the pool hall and bowling alley to
Schwab and eTrade, becoming “expert” flipping stocks and less interested in winning the Raccoon Lodge best costume contest, companies had to adopt short-term mentality. Consequently, decisions were made to promote people who demonstrated an ability to quickly put up numbers rather than build anything. Social intelligence, at best, became a nice to have rather than an important consideration. Sure, it’s interesting stuff, it will undoubtedly get airtime at company meetings, consultants and trainers will earn big money popping off about all this, but tell me how it translates to and meshes in with a fundamentally flawed prevailing mentality?

Now let’s apply it to a more visible and recent stage. There has been no more public a flogging than
Rick Waggoner and GM; I know of no company that has a more genteel socially intelligent culture than General Motors. Make no mistake about it; Waggoner is a brilliant and wonderfully accomplished man. So how is it possible that he flew to DC in a private jet for a congressional hearing in January, with no prepared notes, to ask for government money? Even a clueless dope knows better than that! Heck, a politician—the audience he was appealing to—would have driven in the cheapest Chevy car made, stopping for photo ops in cities like Youngstown, Pittsburgh, Wheeling, etc, along the way showing himself to be a sincere, humble, man of the people. With all the executives, PR professionals, etc. at GM do you really think nobody else knew this? So how did he seal his own fate by making this colossal mistake?

Because in Corporate America, the job is to go home and yuk it up with the spouse that “The Emperor Has No Clothes” but never to tell that to the Emperor for fear it would be damaging to the career. The sum is always greater than the whole…my job, my department, my budget, my preservation will always trump the corporation.

Interestingly, I spent a great deal of time in DC recently. One night, while I was there, I had dinner with two former high ranking officials in the former administration
. In their world—to this day, even after serving the most failed administration perhaps in history—they remain committed to their mission…in their world the whole is always greater than the sum. These are very smart, very accomplished, incredibly skilled professionals…they’re not panderers. And while I respect them and like them, I am certainly no fan if their politics. How often do we see business people engage in turf wars, unable to disagree without being disagreeable? Rarely! I’m helping them launch a business, in fact, because we can agree, disagree, never lose sight of the goal.

The purpose of a business is to turn a profit. To me, that’s where social and emotional intelligence is applied. Whether it’s this gal Janice or countless others, typically practiced by entire companies,
social and emotional intelligence falls dreadfully short because “me” is always greater than “we”.

So in my sum, the article tells us the anyhow…but
Goleman & Boyzatis do not go deep enough, wide enough, or apply it well enough to be useful.

Just my 2 pennies