Smart Money for Smart Businesses

Businesses looking for capital will find investors are more active and willing as they have more money to put to work than had been the case in the past few years.  While deals are getting done, it is a more deliberative process than the vigorous late 1990s market was.

I've met with many fund managers, venture capitalists, institutional and private lenders this month and although each might specialize in a particular domain all share common traits for companies they will invest in.  Though money is abundantly available, it clearly is an investor's market.  It's not uncommon for institutions to evaluate several hundred opportunities each year; even the most aggressive investors will close only a small percentage of the qualified companies they evaluate (10% seems to be the consensus).  Investors are quick to point out that they are impressed by the quality of deals they are seeing and freely recognize they are passing on quite a few good companies in what amounts to funding of the fittest in this highly competitive environment   Among the more compelling and universally expressed investor insights, businesses seeking capital have a greater chance for success if they:

1.  Feature an Excellent Management Team:  Investors are no longer simply looking for impressive resumes, they want to see track records from management teams that have produced results and have worked together over the long haul.  Many give preference to management teams that have stayed together after facing adversity in the business both as a way to prove stability and to demonstrate the team can successfully overcome challenges. 

2. Differentiation and Vision Matter:  Solving marketplace problems might be enough to keep a company in business but it's unlikely enough to attract investors.   Solving problems is a lagging indicator while investors are more interested in leading indicators.   With an emphasis on unique, businesses must be able to communicate their unique strengths to any investor committee and then reinforce these superior advantages by outlining management's view of the future and how their company is poised to capitalize. It's all about growth.

3.  Emphasize Business Development History and Strategies:  Present accurate and comprehensive sales funnel information, including historical sales cycle times and close ratios.  Comparative sales funnel data is also invaluable, especially if the company can show reduced sales cycle times and higher close ratios.  Management teams that are able to communicate why and how they have improved sales cycles and close ratios stand a better chance than those not well-versed in these essential details.  Deal-flow is an important consideration, investors are keen to know about sales not closed and the reasons why.  In some cases, companies gained rapid investor committee approval by blending their vision with deep analysis on business they had lost and how an infusion of capital would be allocated to apply valuable market intelligence gained to expand product offerings and service lines.

4. Style and Substance:  Everyone seems to have slick presentations and wonderful PowerPoints which undoubtedly diminishes the impact.  Businesses piquing real investor interest are able to emotionally and intellectually grab their attention by highlighting strategy and then supporting it with meaningful and measurable plans.   There's a strong correlation between enthusiasm for an investment and enthusiasm for the product/service, the latter achieved by having (prospective) investors become intimately familiar with the business.  If they can't relate to a business it's unlikely an investor will put up risk capital to fund an entity.

5.   Validate Before Proceeding:  Even the best management teams will have blind spots and before seeking capital,companies are wise to hire credentialed professionals to assess their business, critique and refine strategies and business plans so that they are best positioned to earn investor trust by having fully considered all threats and opportunities, having excellent answers for the toughest questions, the most significant of all "Why should we invest in you?"

Of course great ideas will always matter, but sincerity seems to be more important in this environment.  Investors are anxious to work with real people in real companies with real upside and have available capital for those who prove they qualify.

This blog, by the way, will be migrating to my all new website/blog!
Go to: http://www.bermanmeansbusiness.com/ 

CASE STUDY: MANAGING IN THE GRAY

BACKGROUND:  Privately held industrial service company, run by 3 partners in a highly competitive, fragmented industry. One partner leads the company's sales and marketing, while the other finance and the third manages the service workforce. Though the three partners collaborate on all major business decisions and work well together they each have greater expertise in and feel for individual primary responsibilities.  

THE PROBLEM:  Demand for the company's service is particularly high between early November and early January. One of the company's top service technicians has achieved master mechanic status, a level fewer than 20% technicians ever reach in the industry, and is recognized by customers and peers for routinely outstanding work. Customers often request him by name for their most complex and time-sensitive jobs. The mechanic recently earned a substantial pay raise and year-end bonus for his technical excellence. However, the technician is also known to be a discipline problem and will call out sick at unacceptable rates. He typically calls out sick in the morning, right before the start of a work day leaving the company little to no room for planning. These absences put the company at risk for honoring customer commitments, potentially costing them business. More often than not, he calls in sick around holidays or Monday and Friday.

THE DISCONNECT:  During this period the technician called out sick at an unusually high rate (even for him), putting enormous stress on company resources and client relationships. As a way to discipline this employee and send him a message, the company service leader decided to suspend the employee without pay for two days. He opened this discussion by telling the technician "you have let me down and I can no longer tolerate it." The technician responded angrily, threatening to quit because competitors know he's an excellent mechanic capable for making them as much money as he does his current employer. The technician went on to say that unless management lifted the two day suspension he was prepared to quit and go to a competitor.

THE INTERNAL DEBATE:  Recognizing the technician was serious about his threat to seek employment elsewhere, that any number of competitors would hire him instantly--likely at an even higher salary--and that the technician could likely pull some customers with him due to his exceptional skill, but also fed-up with the technician's poor attendance record the company service executive discussed the matter with his partners. Both reacted the same way: the 3 partners would meet with this technician and immediately fire him for insubordination and irresponsibility, and have the company sales force get out ahead of the news by informing key customers of the decision and why so that they would not lose business to a competitor hiring this individual.  The finance and sales partners also wanted to hold an internal meeting to inform staff about this termination and corresponding reasons to reinforce company standards and send a message.

• Initially, the service executive agreed with his partners and scheduled the 4 person meeting, but the more he thought about the situation and potential consequences he became less certain. Clearly, he could not run an efficient business with high rates of absenteeism but he also know it would be extremely difficult of not impossible to replace his most expert technician.  As he thought about it, the service partner believed he could hold a productive meeting with the technician but if he included his partners in the discussion he had no doubt it would end with an ugly termination.
  
  Managers are routinely confronted by similar situations every day. If you were this service executive what would you do and why?
  
• THE SOLUTION:  Ultimately, the service executive decided to meet with the technician alone and had a very productive meeting. Rather than framing the discussion through the personal "you let me down" the service executive opened by reinforcing how skilled the technician is and how important he is to the entire company.  He then related it to the greater responsibility a true leader like this technician has to all other employees, who were all dependent on him to be someone that could be counted on. The service executive talked about his personal-professional responsibility running a business, where protecting the welfare of the 150 employees and their families depending on him to make wise business decisions is his most sacred trust; a trust that is violated if he did not enforce basic standards. Effectively, the entire team was counting on the technician to be more responsible and counting on the executive to get all team members to function as a high performing equally committed team. Put in this perspective, the technician admitted he had never really thought about it this way before, thanked the service executive for his guidance and went back to work at the company promising to be a more accountable professional .
  
  Successful management teams build high levels of cooperative trust because they play off of and to each other's strengths. In this case, the service executive thanked his partners for their input and acknowledged they inspire confidence in each other because each trusts the other's functional expertise. In this spirit, it only made sense for him to privately meet with the technician. service executive recognized his partners are most comfortable operating in the black and white world while managing a service workforce requires mastery of managing in the gray area. 
  
  THE LESSON:  As this case clearly demonstrates, mastering the gray is an even more critical trait the higher one goes in any organization and is necessary for making balanced business decisions.  

Replace Fiscal Cliff with an Organizational Mirror

For everyone who ever voted for a politician promising to make government run more like a business, congratulations your dream has been realized by the post-election theatrics shoved under the "Fiscal Cliff" catchphrase. Perhaps this public display of dysfunction and lack of courageous vision will scare companies straight away from the type of behaviors that have plagued US corporations for decades.

The post-fiscal cliff headlines range from predicting the emergency deal will help the housing recovery to uncertainty about how it will impact alternative minimum tax to "Nothing Really Has Been Fixed." Just as it happens too frequently in business, your bias and rooting interest matters more than best outcomes. The public posturing that brought the US government to near crisis ended not with meaningful compromise but with partial selling out by all to meet a deadline. Because DC's deal was reached by selling out it allows both sides of the argument to second guess the other should anything go wrong.  Second guessing has become one of the most practiced of all corporate behaviors which is why so few tough decisions ever get executed.

Unless participants recognize the whole of any institution is greater than even its most significant sums not only will they shy away from tough decisions they can't even reach compromise because doing so minimizes a constituent (be that constituent a business unit or a political party).  Without embracing the risk that accompanies every big decision participants can only revert to small thinking and smaller actions--the enemy of progress.  When humility is replaced by the masquerade of pretending to be the smartest or most in-control guy in the room, participants can only talk at one another, rather than listening to and working with peers. Elected officials guiding their every action by polls and the next campaign are as destructive as managers calculating their every move to earn a bonus or promotion are to any business.

More often than not I'm brought in to companies to solve these problems which is done through a simple process: change the person or change the person.  

What I can't yet figure out is: Why do we keep electing politicians who embody the very worst of Corporate America's characteristics?

The Fundamentals of Start-Up Business Success--Part 4

Though the road to sustained success is paved by consistent execution it is lit by the leader's clear vision.  As a fundamental, vision is not some starry-eyed sound bite intended to inspire but more often than not, confuses.  

Clear vision is a necessary fundamental because it allows leaders to see things as the are so they can chart the right kind of action. 

1.  Separate Activities from Actions. 

I am always most wary of any employee with an unchallenged reputation for being a hard worker.  More often than not these employees actually create their own hard working urban legend and then propel it by "being too busy" for pretty much anything thrown at them during the business day. I've seen too many managers mishandle these extremely busy hard workers to the point they do serious damage to a business. In the most extreme cases, mismanaged hard workers become their own renegade operation within a greater company.

Hard work and staying busy are, at best, means to an end and not objectives. When properly channeled, they are activities that certainly contribute to any company's success and are also positive cultural attributes.  The only useful measurements are (a) activities that make money, and/or (b) activities that save a company money.   Unless activities can be tied to these tangible actions they are counterproductive. Activities that correlate to positive actions then must be further measured by Time + Expense/Return analysis. The lessons of confusing activities with actions tend to be the costliest and in many instances are the most difficult to undo. 

2.  Manage By The Decision-Making Tree.

At all levels, as it relates internally or externally, a disciplined approach to processing and making decisions is necessary for successfully managing to meaningful business plans.  Emerging businesses do not have an abundance of time or resources; decision-making proficiency is essential. 

I've adopted "The Decision Making Tree" as my best method for mastering the process:

• The lowest, sturdiest, and easiest to reach branch is mindshare--taking time to evaluate information.
  
• A stretch, but within reach for a fit climber who sees the potential, the next branch is priority.
  
  When presented with something that makes sense and has the potential, grab that priority branch and pull yourself up.
  
• The view from priority is usually rather spectacular, but also a bit scary so before going any further you want to make sure it's a worthwhile climb. Research, consider, take input, and just to be sure you are not setting yourself up for a great big fall as the branches get thinner and harder to grab, make proper resource allocation.
  
  This could come in the form of a pilot program, trial, or some other controlled study that will validate whether you should keep climbing or shimmy down this tree.
  
• Like any tree, the highest branch is the most perilous to reach.  Because it is also the weakest and thinnest, you must give it proper support before perching yourself on it. However, when you are there, the view is as sublime as the achievement is great!
  
  The highest branch is commitment and in this decision making tree, commitment means an absolute, unyielding come-hell-or-high-water commitment to seeing the endeavor through to success. 

This orderly process allows one to make go/no-go decisions at natural break points, while obligating participants to drive an initiative to goal once that final decision has been made. In far too many tragic instances I get called into companies that had the right ideas, but lacked the resolve to see good decisions through. Rarely does anything even happen in one natural straight line, there will always be challenges and setbacks to anything new.  

The Decision-Making Tree allows us to move forward through confidence based on each prior step so that when we get to the top we have the confidence to conquer.

Yes, I use this method to also evaluate sales funnels for the purposes of improving close ratios and sales cycle times.  Using The Decision-Making Tree criteria analyze where you stand with each of your prospects.  Chances are you will find many of the prospects you think "look good" have never progressed past mindshare. 

3.  Growth is a Leading Indicator.

Most management tools and even perspectives follow lagging indicators. We all know why historical data is important, but an over-reliance on history and obsessive reviews of last month and last quarter makes absolutely no sense unless you possess the power to change history.  Since we do not possess these superhuman qualities, let's out our mortal capabilities to best use.

What we learn from last month or last quarter is important, but how we apply it to meet our objectives is everything. Therefore, the leading indicators smart growth businesses run the business by put the greater emphasis on setting realistic yet aggressive short and longer range objectives and then recognizing/rewarding employees based on performance.  

When combined with the other easy-to-implement and highly integrated fundamentals outlined in this series your business will have a record 2013.

Happy New Year and best wishes for a successful 2013 to all!

The Fundamentals of Start-Up Business Success--Part 3

Leaders control their own destiny, the best leaders distinguish themselves when faced with adversity. Earlier this month (December 11 - The Fundamentals of Start-Up Business Success--Part 1), I established five (5) necessary qualities for building and sustaining success. These qualities are brought to life, through consistent action, starting with these 3 primary fundamentals:

1.  Ensure Alignment Through Plans: Every company's highest ranking officer must set the tone by delivering a strategic and tactical plan to all direct reports.  Within one week each direct report must create the same for her functional responsibilities.  These plans must cascade throughout the organization and progress against established goals becomes the focal point for internal weekly meetings. The process must be guided by honesty; it is incumbent on every manager to challenge presented plans, 360 degrees.

For example, I worked with one CEO whose primary if not sole objective was to earn as large a bonus for himself as he could.  At the other end of the chain-of-command spectrum a VP reporting to me was singularly focused on getting promoted.  Of course neither openly admitted to this, which is why the former groused every year about not making enough money in his role while the latter never got that promotion.  Neither the CEO nor VP were able to constructively work with others because they defined success purely through their own personal agendas, where co-workers, supervisors and direct reports were all adversaries. Simply put, it was impossible to align the organization which kept the company from generating reasonable results years on end. Within 6 months of implementing this process, both the CEO and VP were out of their positions as they were unable to support their words with consistent deeds or actions. 

2.  Meaningful Customer Mapping and Segmentation:  You undoubtedly know the percentage of revenue your top 5 and top 10 customers represent.  How does this list compare to prior years, both the names on the list and their impact on your business?  What do you attribute any changes to?  More critically, unless you've previously implemented business plans and disciplined reviews you can't honestly say if any changes are positive.  Though one can build a business by simultaneously growing customer share and market share there must be a driving strategy to manage your business against.  I'm too often called into companies when they've fallen into the last stage of desperation because they misread what was really happening in their business, fooling themselves that "I don't care how we made the number as long as we made the number" is sustainable.  For example, if you expected to grow in 2012 by adding new customers but at year's end you satisfied your revenue target strictly by growing existing customer revenues you should be concerned.

I believe the most important aspect of customer mapping is to identify the degrees and strength of mutual touch points.  How many people from your organization regularly interface with each customer and how wide and deep are your contacts in each customer's organization?  Expecting "relationships" will prevail ignores the competitive global environment and hinging your revenue on a singular (customer) executive contact ignores the reality that C-level executives and senior managers are turning over at faster rates than ever before.

Meaningful customer mapping and segmentation does not merely protect your existing base. When I first did this exercise I discovered that my organization had deep ties to our best customers' Accounts Payable departments.   Following through on this data, I quickly discovered that virtually every AP department in every company hated our industry because our high-volume low-dollar invoices were a pain in the neck to process.  Within a year we added over $100 million in new business by selling streamlined billing while our competitors never knew what hit them.

3.  Competition is Broadly Defined:  Whenever I ask "who is your competition?" I get the same stock answer: like-companies producing like-products for like-customers. Wrong!  Your competition is everyone selling every conceivable product in the world because in building your business what you are first competing for is mind share: engaging a prospect in conversation that may eventually create a customer.  No buying influence can make time to meet with or review materials from every company trying to sell them something. As practical people they will entertain only meetings with prospective suppliers most likely to help them meet objectives where high tech and low tech are lumped into one schedule dictated by (perceived) impact.

The typically narrow view of competition is best evidenced by the myopic sales pitch I now hear in my sleep, those droning promises to save me time and money.  A business, let alone an entire economy based solely on the promise of reducing costs cannot sustain growth.  I can assure you any prospective supplier suggesting they can help my business make money will get serious mind share and if these initial promises prove to be true that conversation will become a fast-tracked priority. 

In industries that are often dismissed as commodities I've had particular success positioning the company to help its customers convert a cost center into a profit center.  This is surprisingly easy to implement as long as your company manages to plans and has a firm grasp of its customer base.

Part 3 of this series features the three (3) effective steps for controlling your own destiny while others fret over fiscal cliffs and things they can't control. Like all fundamentals, they build on one another and are dependent.  

In Part 4, I'll put the finishing touches on necessary basics for ensuring your emerging business success.

The Fundamentals of Start-Up Business Success - Part 2

Instead of looking to politicians in DC, business leaders must control their destiny. Part 1 in this series identified matters executives can take into their own hands. Part 2 features NFIB's troubling survey.

In Part 3, I will highlight strategic and tactical initiatives small, start-up and emerging businesses should take to ensure profitable growth.

The Fundamentals of Start-Up Business Success - Part 1

Start-up and early stage businesses will determine whether or not the US economy makes any progress in 2013.  Though there is a great deal of advice offered to help entrepreneurs succeed, most of it is redundant and ineffective; just look at the historical record of new venture failure if you have any doubts about this.

In this multi-part series, I will identify the key ingredients for building a successful start-up/early-stage enterprise that have been proven to work in all industries.

1.  It's a For-Profit Business, Not an Offspring:  Understandably, entrepreneurs get emotionally wrapped up in their business.  Though the deep attachment has its benefits, like any other strength when left unchecked it becomes a weakness.  Leading a business requires consistently excellent judgment; emotion is the enemy of sound decision-making.

2.  Maintain Proper Roles and Responsibilities:  Arguably the most expansive and challenging aspect for successfully growing a business.  In many instances executive management rewards early hires through promotions to bigger roles.  For example, a loyal hardworking bookkeeper is rarely equipped to become a CFO.  More urgently, entrepreneurs should set very specific ground rules for investors who become board members.  Venture capitalists, private equity professionals and the like are far more experienced in business analytics than they usually are in business operations.  I have seen more businesses harmed by amateurs with money pretending to be experts at strategy or organizational design than any other single factor.

3.  Successful Disruption Comes From Outsiders:  Hiring senior management from within the industry a start-up business intends to compete in defies logic.  Industry veterans are rarely ever able to conceive anything other than an industry's status-quo.  Captive to convention, "that's not how this industry works" is both the industry veteran's favorite saying and the entrepreneur's motivation.  Early stage companies must offer superior alternative value to the way things have been and are.  This simply can't be achieved by those who know only those rules.

4.  The Curiosity Imperative:  Regret only the meetings you didn't have and the people you didn't meet.  For early stage executives, working on the business is more important than working in the business yet too often leaders claim to be too busy to do anything but work in the business, consumed by tasks.  Your bright ideas will be validated and even further illuminated by those you meet.

5.  Resources are Precious:  One of the great big lies is "we need fancy office space to impress prospects and customers." Emerging companies spending too much for swanky offices do so for their own ego, not because the customer expects it.  For every $1 fully loaded expense you had better be able to generate at least $7 in revenue.  If you can't then expect each $1 spent will destroy your company's value by at least $10.  And above all remember this: your most precious asset is time because you can never get that minute back you lost.  Therefore, if you do not run the business through and by meaningful plans you're wasting too much of your time.

Despite the popular advice, there are neither short-cuts nor fairy tales for building a successful business from scratch.  If you are a start-up/early-stage business executive, I urge you to evaluate your company on each of these 5 basic fundamentals and if you don't like what you come up with you should be encouraged!  The first step to fixing a problem is recognizing it.  

In Part 2, I'll cover positive ways to steer the business forward. 

The Consequences of a No-Sacrifices-Environment

Several recent news reports caught my eye, not as individual stories but as closely connected pieces of the same continuum:

1. Adam Davidson's November 20th "Skills Don't Pay theBills" piece in the NY Times Magazine highlighting the fact that despite high unemployment rates and advanced jobs training programs nearly 80 percent of manufacturers have jobs they can’t fill.
2. The tragic factory fire in Bangladesh that killed 112 workers, earning on average $43 per week apiece, and the leading consumer brands the garment factory was producing for.
3. Mixed reports on 2012 holiday season retail sales, where the one accepted fact seems to be deep discounting is the only true stimulus for making the cash registers ring, following a 0.2% decline in October consumer spending.
4. The Bureau of Economic Analysis' report showing record profits for US corporations in the 3rd quarter 2012.
5. Around the clock coverage of the looming fiscal cliff that pretty much says nothing because it sure doesn't seem as if there's been any progress in DC.

Business' truest measurement is profitability and if Q3 2012 produced record profits then executive management is doing its job, superbly.  In part we can attribute the nearly $72 billion increase in 3rd quarter profits to greater cost-efficiencies, but top-line revenue growth certainly had significant impact. But where cost management and sales/marketing might once have been opposing forces, the trends further convince me the lines between revenue generation and cost controls have not only blurred they have merged.

If consumers now value every product and service as little more than a commodity then companies have no option but to meet this demand by so reducing costs they can profit by winning the discount game.  Labor usually represents a substantial business cost and it is little wonder that manufacturers are finding it difficult to hire trained workers if they are paying less than a McDonald's shift manager earns, as Adam Davidson reported.  I have nothing but contempt for modern day sweatshops like the Bangladeshi factory, but racing to the bottom is inevitable when any industry is caught in commodity hell.

It's very easy to blame business and "heartless executives", and whenever there's an easy answer for anything I grow suspicious. Consider this:

The consumer is really the most accountable participant in this vicious cycle by making price the single largest success factor! The same person who laments stagnant wages, off-shoring and the overall shaky economy demands prices that are sure to perpetuate these conditions. 

Politicians are usually the best reflection of the era they serve in. As the Obama administration and congress continues its food fight over the massive problems we will face at midnight December 31st they seem no closer to resolving anything because they, too, want easy answers with no sacrifice on the most complex issues.

Fundamentals Always Rule

Election week ended with a bang, bringing news very much in line with this year's vote to maintain the status quo.  JC Penney's Ron Johnson continued to reinvent retail, this time coming up with the outrageous new idea of offering coupons and discounts to get holiday shoppers in the door while David Petraeus reinvented Washington-sex-scandals-as-an-older-man-in-a-powerful-position, having an affair with a much younger woman.  But even these great stories weren't enough to turn our attention away from continued east coast hardships created by Superstorm Sandy.

Take these two NY-based companies that have both severely crippled by Sandy and the storm's aftermath: Both have suffered damage to their operations, both have had a difficult time getting gas for their vehicles, both serve customer bases equally impacted by Sandy, and both are in extremely competitive industries.  Both companies also have longstanding records of valuing employees, caring deeply about respective workforces. However, one of these companies has had a very strong 2012 ( "Company A") while the other ("Company B") has posted declining revenues and profits this year. I was very intrigued to hear how these companies made such vastly different decisions on how to handle rather substantial payroll for the days employees couldn't get to work due to the storm. Thus I believe is truly newsworthy as this difference illustrates real action that supports turning-around of the US economy.

After much discussion and deliberation, profitable Company A decided not to pay employees for days they didn't work, instead having workers take them as either vacation or personal days.  By contrast, the struggling Company B CEO made a snap decision to pay everyone for the lost days without even bothering to talk it through with his senior staff.  Seems like that CEO is a better executive to work for and his pro-employee stance is certain to better motivate the workforce, doesn't it?  Think again.

I marveled at Company A's careful examination of all the facts and possibilities before making such an enormous decision.  They fathomed that the price of raw materials, notably gas, would continue to rise and likely squeeze profit margins if even temporarily.  They also projected a spike in customer demand which would increase use of overtime hours, while further forecasting that many of their clients would pay slower than usual which might compromise cash flow.  Their conclusion was to base the decision on sound fundamentals: if their conservative views proved wrong they could then elect to distribute greater bonuses at year end and if they proved right they would not then be forced to take more drastic measures in reaction to full payroll days that weren't worked. 

Little wonder this company has been consistently profitable, weathering several recessions, post-/9/11 trauma and other challenges the business has faced in over 30 years of operation, never taking a layoff or forcing salary cuts on its workforce.  By working as a team, they also incorporated the best in managerial due process.

In his haste, Company B's CEO didn't consider any of these trailing issues.  How could he?  He didn't even bother to discuss it with staff.  Sure, all the employees getting paid for days they couldn't get to work for no fault of their own will be thrilled...at least in the moment.  But how long will that last? If they run into the same or even similar problems Company A's management team evaluated, you can bet Company B will face another round of austerity measures.  Indeed, it should not be surprising that since the broad economic downturn 4 years ago Company B has regularly eliminated jobs, imposed pay cuts and frozen hiring. 

Fundamentals aren't interesting enough to make news, especially because they are the anti-reinvention. But in the end, regardless of the endeavor, fundamentals always rule.  Perhaps this is why JC Penney has learned selling other company merchandise is not the same as selling proprietary technology in today's retail environment, why the incredibly qualified and talented head of the CIA can't stay in his job if he violated the trust of his family, and why Company A will continue to thrive as an excellent organization with a true commitment to its employees while Company B will likely join the scrap heap of businesses that failed in the not-too-distant-future.

Unfortunately, no surprises--we're all in this together.

With predictable regularity the business press can be counted on to run feature articles that "change is hard" and "most change management initiatives are very expensive and time consuming yet fail." These pieces are usually accompanied by tips for creating the right change environment so that the reader's company succeeds with its change management strategies.

In an election cycle that seemed to have started the day after John McCain conceded in 2008, after billions of dollars spent, and public opinion polls consistently showing politicians--of all stripes--are less popular than wicked storms on the east coast, the same population that doesn't successfully implement business change management programs voted to keep the governmental status quo.

The House of Representatives, Senate and Executive branches of government will look rather identical to the very group we overwhelmingly find distasteful. From my experience leading business transformation across a range of industries this, sadly, comes as no surprise.

The barrier keeping companies from realizing change management objectives is rarely a matter of sound process and subject matter expertise. Rather, it is the people and lack of purposeful determination to make an occasional sacrifice, grow, adapt and learn for the benefit of an organization (and, more importantly, an individual's career). When I initially assess a company, the vast majority of its time functional managers are certain their department runs superbly, but can point out shortcomings everywhere else in the organization. Senior executives and boards are usually right there with them, convinced they are brilliantly leading the business, only to be undermined by a lousy workforce, unfair (foreign) competition, or government.

Our public opinion polls might express strong desire to replace under performing politicians, but our votes say "my guy's great, yours is the problem." These are the same sentiments and actions I routinely see and fight through in the workplace. The same strategies and tactics I employ in business apply to voting and all other phases of life: It starts and ends with what you see in the mirror.

Shortly after Ohio was called for President Obama he tweeted, "We're all in this together." For the health of our nation and vibrancy of our economy, let's do more than hope this is more meaningful than "another Twinkie."

It's back to business for Merisel--winner of American Business Awards Turnaround of the Year

and updating my blog... 

Last night the American Business Awards were handed out at the Marriott Marquis in New York City. I was a finalist in two categories and I truly am honored to have lost to the likes of Ford's Alan Mulally (Executive of the Year-Manufacturing).  

As many of you know, the American Business Awards --part of The Stevie Awards program--honors the achievements and contributions of US-based businesses and their employees.

Individual awards are never as meaningful as team accomplishments and I am privileged to report that Merisel won Business Turnaround of the Year at last evening's 9th Annual American Business Awards. As a member of Merisel's executive management team, I couldn't be prouder of this accomplishment. 

More updates to follow.

RIP Amy

My cousin Amy died earlier this week. During the late 70's and early '80's Amy was one of the few who could actually pull off the Farrah Fawcett look-alike style. Back then her eyes smiled and she could light up a room when she broke into a full facial smile. When she died this week she was alone in her apartment. The Amy I remember from when we were kids could have never conceived she'd have a mostly sad adulthood spent trying to find her meaningful place in life. I hope the Amy still had memories of the Amy that once existed. She was a young girl filled with potential. I'll never know if she died too soon or too late when her body was discovered earlier in this week; she was in her mid 40's.

On the day I went to Amy's memorial service I spent most of my time working with a couple of different cross-functional teams trying to solve frustrating operational problems and institutionalize improved cost-efficiencies. The teams were comprised of skilled professionals, highly knowledgeable in their craft, all extremely passionate about their work. The issues we were confronting weren't easy. Every time the stakes in our problem-solving excercises were raised or when we would get to oftentimes difficult truths, someone would invariably say "look, it's not like what we do here is life-and-death important" (or some similar version of that remark) as a way to let everyone off the hook.
Today I won't digress in to one of my rants or dissect the meaning of or implications of cross-functional team members letting one another off the hook. No, the real subject here is way too important as I think back on Amy's life not lived---considering that there are probably millions of people in the world who have said or thought the same ("it's not life and death") about the work they do.


If my cousin Amy had found her meaningful place in the world, had she found a fulfilling career in a field she was passionate about, where she had been respected for her knowledge, admired for her skill, I dare say she would still be alive today and those expressive eyes and the mile wide smile would still radiate life that was really and sadly extinguished long ago.

So, please, for your own sake and for my cousin Amy's memory, no matter what you do, no matter what your industry or career path, never ever demean yourself or the work you do by even thinking anything as absurd as "it's not life or death." I'm here to tell you, with Amy as a haunting image, what you do, how you do it, and the meaning you get from all significant aspects of everything you do is very much a matter of life and death.

Perhaps 49er Coach, Mike Singletary's "Getting-Results-Style" could be an example of how to succeed in business for 2010?

I couldn't have wished for a better end-of-year lengthy discussion than my lengthy session with Chris this week. He's one of the brightest, curious and most committed young professionals I've ever had the privilege to work with. As we get set to bury the truly God-awful 2009 reconnecting with Chris is the best reinforcement that better days are ahead because ambitious emerging talent always leads to a better future.

During our discussion Chris talked about a particular department he had been working with that certainly had issues but he said was thankfully comprised of "many experienced people." He reeled off a rather extensive list of issues, but the headlines were:
1. The department didn't have a true manager;

2. Each of the department employees did things their own way;

3. 2009 was a disappointing year for the company, revenues were off and although they had made great progress, costs were still higher than they should be. As he assessed it, the biggest cause for higher costs was waste due to breakdowns in the order entry-to-production cycle;

4. The department was supported by tools that were decent enough and although they were constantly being upgraded not everyone in the department thought it necessary to use them;

5. The company and its industry was going through radical and perhaps even painful changes but not everyone in the department was sensitive enough to these changes to adopt new methods.
So here I am with a wonderfully gifted individual who represents the future, fascinated by his apparent celebration of the past--one that was no longer working--who valued experience.

Clearly,"experience" can mean a great deal of many positive things, but in an environment that is defined by change, I'm rather certain that captivity to experience --for the sake of it-- is a guaranteed losing strategy. Of course Chris, like all of us, must respect and honor proven experience yet I believe it is just as important to keep in mind that experience is not a synonym for expertise.

Given the five isolated problems (listed above), does this seem like an expert group?

Shortly after speaking with Chris I found the time to finally check out the 2010 NFL Pro Bowl rosters. The first thing I noticed was, although named an alternate, NY Jets' Left Tackle D'Brickashaw Ferguson didn't make the AFC roster. A classic case where voters confused experience with expertise because in his 4th year Ferguson played so expertly he deserved to earn Pro Bowl. But the selection that really leaped off the page was San Francisco 49er Tight End Vernon Davis earning the starting Pro Bowl spot for the NFC. That's the same Vernon Davis who wanted to do things his own way during the 2008-2009 season his coach, Mike Singletary, publicly blasted him, more than once. A year ago it sure looked like Vernon Davis was headed for the scrap heap of "uniquely gifted athletes never to be heard from again, destroyed by a lousy attitude."

Singletary, an NFL Hall of Fame player and a 10-time Pro Bowl selection himself cared enough about excellence, followed his convictions to push Vernon Davis, and one year after Davis was shocked by his head coach's tirades against him, undoubtedly was the catalyst for Vernon Davis becoming an NFL all star.

For Chris and his company and all others, I wish only the best things for you in 2010 and suggest it can be a wish-come-true by applying a bit of Mike Singletary's style of getting results to succeed in business climate more volatile, competitive and exhausting than the NFL.

Happy 2010 Everyone!

Let's rebuild our businesses through the sincere efforts of the committed professionalism of top performers...

With Kirk and many like him still very much in my face and on my mind, I was thrilled to run into the Anti-Kirk the other day. The timing couldn't have been any better because focusing our attention on professionals that are part of the proverbial solution, rather than those who define the problem, is the ticket to creating and sustaining high achievement.

For many years I've commuted home on the 8:04 PM Metro North train out of Grand Central Station and it was on this ride I got to know Joe the Conductor. If Joe ever told me his last name I've long since forgotten it, but I've gotten to know him rather well and have always admired his work. When bucketed in to stereotyped categories, Joe (a proud union member working for the Metropolitan Transit Authority on the Metro North New Haven Line where the train cars date back to the 1970's), would seem to be a leading candidate for a horror story. But Joe the Conductor served as a nightly reminder that pride in workmanship, a keen sense of professionalism, and a deep understanding of customer service transcends even the most hardened stereotypes.

Over the years I learned a great deal by watching Joe; the way he handled belligerent drunks, resolved disputes between passengers, calmly dealt with the occasional rider who didn't see any reason to buy a ticket, kept order when trains broke down or were forced to endure delays. Whether it was a cold winter night where several cars didn't have heat or brutally hot summer days when the air conditioning didn't work, Joe stayed in calm control. From time-to-time he would tell me about MTA policies or management decisions that made no sense, occasionally observing that the New Haven line was in sorry shape. Like all of us he undoubtedly had his bad days, felt pressures from professional or personal challenges, but Joe was the rare talent who was able to rise above any of these forces. I never saw him have a bad shift, I can't ever recall him mishandling any situation (and on the 8:04 there were many tough ones, none of them could have been predicted), and he lit up every car of every train with his constant smile.

Joe retired earlier this summer and yet there he was the other night, kicking back as one of the passengers. Maybe it was his farewell tour or perhaps he simply missed being at his office, but it was great seeing him one last time. Seeing Joe the (retired) Conductor again was a much needed reminder for me that companies, industries and the entire economy as a whole can only be rebuilt through the sincere efforts of the highly knowledgeable, the deeply skilled, and the committed professionalism of top performers like Joe.

Continue to let Kirk Grow Into His Role ----How Does That Kind of Decision Impact Any Company's Growth?

For several weeks now I've had opportunity to work closely with a mid/high level manager we'll call Kirk. He's a sincere guy with a work ethic anyone would respect and seemed reasonably competent. However, it's often difficult to know this about Kirk because he fell into the nasty habit of rarely thinking before he spoke. If this self and organizational destructive behavior was limited to Kirk I wouldn't bother writing about it. However, we've all encountered any number of Kirk's so discussing how he is progressing can be quite useful.

Kirk's on-the-job behavior fit a very familiar pattern. Pick any subject and he'd instantly tell you he knew all about it, but went no further than that one-liner. Because he was an expert in every field he was extremely busy all day long, "putting out fires" (as he would say) --which is why he just didn't have time for anyone else or anything else especially in-depth dialogue! Of course, high on the list of things he didn't have time to evaluate was why his day was dominated by putting out fires in his areas of responsibility. But more insidiously, Kirk the know-it-all had mastered the art of delegating every decision up the ladder, which then relieved him of any accountability. One thing Kirk always seemed to make time for was to bemoan the fact that his boss made some really dumb decisions, which explained why he had to fight so many fires.

In truth and fairness, though, Kirk's boss and other company executives fed into this nasty cycle because they not only enabled him they created conditions that allowed Kirk to delegate decisions large and small to them while he escaped accountability for anything other than always knowing everything and always being right. Whenever Kirk presented an issue or problem up the chain of company command executive leadership quickly supplied answers, always putting themselves in the middle of the most mundane business matters. Kirk always had time to run into his boss' office throughout the day or send dozens of emails, always asking for instructions never even making any recommendations. Internally, Kirk was held in high regard because he was such an important employee, always incredibly busy, and to anyone's knowledge the single most informed human being on any subject. But I write in the past tense for a reason.

Slowly, the tables have been turned in a way that's benefitting all. due to his obvious brilliance, Kirk was asked to lead a very important company project. Because he had greater knowledge and experience than anyone else could ever imagine he was given full control for developing and implementing an action plan. However, in this case, whenever Kirk tried to delegate his project work up he was met with the same reassuring response: "I really trust your judgment Kirk, what do you think we should do?" Yes, Kirk's prior pattern of behavior was a great cover-up, a defense mechanism, for a managerial incompetent....and now it was getting exposed.

Early in the process Kirk tried to continue his charade by giving his recommendations. In every instance his ideas bordered on the painful or comical...I mean you could have picked someone at random off the street who knew nothing about the company, someone who had never even worked anywhere before, and that person would have come closer to offering a useful idea than Kirk did. Indeed, he went from not thinking before speaking by serving as a router to not thinking before speaking when he was thrust in the role of accountable leader. But credit to Kirk, in remarkably short order he checked his ego at the door and started to work better with others by sincerely talking to them rather than deflecting and talking at others. Over the course of the past week or so Kirk has done some of his most meaningful work because he is actually now thinking through his own solutions, doing his own research to figure things out, and making himself accountable. He even went as far as telling one of his direct report employees that he didn't know something! Interesting, but not surprising, the junior employee first reacted in stunned silence--Kirk had never made such an admission before. But that employee then flashed a small smile...yes, she knew Kirk was not the man he pretended to be all along. The two of them then spent 15 minutes diagnosing the problem and coming up with a solid business solution.

While it's nice to see these small improvements where real progress is being made, it begs a couple of key questions for me...one rather large, and the other as finite as you can get.

The larger issue is how many companies have allowed themselves to similarly get set back, particularly when confronted by the most terrifying business conditions in recent history, how do they quickly recognize and permanently change it?

On the smaller matter, this company's ownership now has to do some serious thinking of their own. They pay and treat Kirk like a senior manager, but he's not even close to being one. Do they continue to let him grow into the role or do they replace him with someone who is actually credentialed?

Best to tell the Emperor he has no clothes before it's too late

Leave it to The King Of Pop's ex-wife to put meaningful perspective on this just-completed strange week when she revealed her then-husband confided he'd probably end up like her father, The King Of Rock & Roll.

Of course this makes me wonder if South Carolina Governor Mark Sanford had similar premonitions that he'd wind up like another once-powerful southern politician, Wilbur Mills, whose career was also derailed by a relationship with an Argentinian--Fanne Foxe. Between the onslaught of news about Michael Jackson's tragic death and the unfortunately shrinking coverage of the comical Governor Sanford I had time to read an email from a former employee who was excited about a new career opportunity because he really liked his prospective boss and is certain he'd "learn an awful lot." Nice to see Chris is still committed to learning because when I wasn't doing all this reading, I was once again immersed in meetings at a company that apparently prefers to pretend rather than really make the necessary changes in its business.

Michael Jackson had some of the smartest, most sincere, loyal advisors ever assembled. As far as the public has been concerned, Elvis' 1977 death was a summer stunner, just like his future son-in-law's summer 2009 passing is. But apparently those who were "on the inside" are not overly surprised. Similarly, you can't tell me that a state governor can actually disappear for an extended period of time without anyone knowing it. I wouldn't have believed this before the Internet and I certainly am not buying it in this day and age.

So....how!??! And why is it that few actually attempt to or even do learn????? I'm truly convinced "History repeats itself" is a true cliche thanks to the stupid, lazy and gutless.

Reinforced by the company I referred to in the 3rd paragraph--one that will die a tragic death which will be greeted with the same shock for its suddenness as Michael Jackson's was last week or Elvis Presley's was 32 years prior--otherwise smart and capable people lack the courage to do their jobs.

Instead of telling executive management about all the company problems and screw-ups they are presenting news executive management wants to hear in a way they want to hear it. They're all convinced the company is perched for a wonderful rebound "when the economy picks up" (which, by golly, they're all certain is happening right now!). Meanwhile they're rotting from within and are unlikely to see Labor Day.

When will serious minded professionals really learn that the embarrassment is not telling the Emperor he has no clothes, but in allowing senseless repeat performances of untimely and unnecessary mistakes?