Abundance or Scarcity?

2011 August 11
by mark

What’s your view of the world: do you look at your competition and believe if they sell something, you won’t? Or do you look at your competition and believe that if everyone does a great job the collective market can grow and everyone can do well, with the possibility that you can do a little bit better than everyone else?

We are trained from birth to believe in scarcity. If my brother grabbed a toy from the box, then I couldn’t play with it. If my sister took the last popsicle, I didn’t get one. If the teacher graded on a curve, we were told that there would be only a few A’s and B’s even if everyone studied hard.

What wasn’t clear to us when we were children was that if our sibling played with one of the toys, there still was a big pile of them in the box that we could play with. If our sister took the last popsicle, our parents would probably take mercy on us and make sure that there were enough next time. And the teacher most likely skewed the “curve” if many people did well.

In small business, I think there actually are few situations where true market scarcity exists. The limitation is what, where, how, and for whom we do what we’re doing. There’s nearly always a new product or service that we can bring to market, or a competitive advantage that we can exploit, or a new market segment or geography we can tap into. And in many situations if a group of companies do well, it naturally attracts a larger client base. Consider the tourism that was created by California wineries, or the small towns known for many antique stores. One winery or one antique store by itself might be OK, but if you’re one of 10 of them, all will fare far better- especially if they’re close to yours.

Scarcity exists in our minds. Abundance and opportunity exist in the real world.

A Buyers Lament: Do You Have Too Many Customers?

2011 July 12
by mark

Recently I’ve attempted to buy some equipment, and I’m beginning to think that the companies I selected must have too many customers. Here’s the evidence:
– They hand out a poorly printed pamphlet of their products and prices with an apology that it’s a year out of date and the prices have changed (I bought from them because of a special deal- one that cost them a lot of money).
– They tell me how to contact them by e-mail for inquiries, but they don’t respond to e-mail.
– They don’t return my phone calls.
– They promise me a delivery date (in May, now it’s July), and nothing happens. They give lots of apologies and lots of promises and no follow through. No call-back, no e-mail response. Nada.
– They lose my paperwork, and then they make mistakes.
– They are late with delivery, and they go into “beg for forgiveness” mode rather than “ask for permission” mode. If I depend on your product and you don’t tell me you’re going to be late, I’m not going to forgive you. I might say it’s OK, then I’m going to buy from your competitor next time.
– When I’m on hold on their phone I hear a recorded message that makes a reference to this holiday season. But it’s July.

Running a business is complicated, but there are a few simple truths. One of them is that you can compete on only a very limited number of things:
– price
– quality of the product or service, the support, and the buying experience
– delivery

That’s it- there’s no other magic. The fortunate few who sell proprietary goods or services may have it a little easier- until someone figures out how to do it better. The rest of us either have to compete by trying to play the volume/price game (a very, very tough thing to do unless your Wal Mart or have high volume manufacturing in China), attempting to out-deliver the competition, or more typically, trying to make a living off of customer relationships where we claim to give a better buying experience and better service (our stated “value proposition”).

If you’re betting your company and your livelihood on giving customers a better buying experience and better service, do you actually have a plan? Are you really better, or do you just want to believe that you’re nicer and let it go at that? Do you execute on the basics? What’s your process for returning e-mails and phone calls? Who answers the phone on off hours? What are your delivery metrics? How do you move inquiries, orders, and jobs through your shop without dropping the ball? How do you ensure that you’re meeting your customers’ delivery expectations? How do you manage quality? Do you reward your employees for taking great care of your customers? Do they even know how to do that, and what your expectations are? Do you measure and minimize your stock-outs, or are you a “we can order it for you” company? Your competition may be surly, grumpy, and sometimes hard to work with, but if they have the part in stock, they most likely will get the business next time.

If you’re not paying close attention to this stuff, you’re fooling yourself. Many of your customers are going to help lighten your load. Next time they’re going to buy from someone else.

And, seriously, who is responsible for changing the message on the phone answering machine after New Years?

Planning is bad for you, isn’t it?

2011 January 17
tags:
by mark

Planning is a bad thing, or so I hear. I’ve been reading a book called “Rework” by Jason Fried and David Heinemeier Hansson, the two founders of the software company 37 Signals. Their company designed Ruby on Rails, Basecamp, and some other highly-regarded software. I like the book because half of the ideas are great (the ones I agree with), but many of the others seem strange to me, particularly for someone who has built a business around the idea that planning is useful and necessary.

The idea that I find to be particularly challenging is that (I paraphrase) a plan is a decision made at a very bad time- early on before any data is collected, and that planning precludes flexibility and good judgment. The authors’ conclusion seems to be that when you create a plan, instead of developing a roadmap with guidelines, you’ve established dogma, and this dogma will make you oblivious to opportunities that aren’t on your plan.

37 Signals did a very smart thing: they realized the commercial value of some simple project management tools they created for internal use in the process of developing some custom software for clients. What they didn’t say was whether they had functioning business planning processes when they came up with the bright and very good idea to see if anyone would buy into software as a service for their basic, simple PM tools- something that has found them a lot of happy customers.

One would be led to assume by their book that 37 Signals did not (and do not) have functioning business planning, because if they had, they would have ignored the possibilities of selling project management tools software as a service. Per their argument, the locked-in dogma of their plan would have precluded them from seeing, or at least acting on this opportunity.

The obvious fact to anyone who has been through a planning process is that making a plan does not lock you in to anything other than… making a plan. The whole process is: plan / check / adjust. If you set a plan, you have created something that, if achieved, will mean that you are successful, or at least will put you on that road. The check process is to see if you’re on plan, so that if you aren’t, you can do something overt- adjust- to put you back on the path to a successful destination, which could be the one you aimed at earlier, or a more attainable one, or a better one.

I think the reason that we need to make plans is that as humans we are inclined to go about most tasks as though they resemble cleaning the garage. The garage needs to get clean- at some time in the future, but we’re not clear when, and it’s full of interesting shiny objects that can provide us with hours of hard work that take us away from what we were trying to do in the first place: be able to put the car in the garage. So we start with good intentions and energy, but often lose track of the goal. We spend a lot of time on “stuff” that seems valuable, but may not achieve any useful progress toward what we realized was important in the first place.

If you make a plan, you need the “check” and “adjust” components to go along with it. Otherwise it becomes the obligatory once a year waste of time an energy. I have never in my professional life seen a plan managed by intelligent adults that precluded common sense. So make a plan, see if you’re on plan every once in a while, and use your head and make good decisions about things that have happened that you didn’t and couldn’t have seen when you made the plan in the first place. This is a good and critical part of what is called “management”.

Thoughts on How to Fire Someone

2010 November 5
by mark

Termination is a macabre subject, and not one that I personally like to dwell on. But a couple of recent experiences have me thinking about what happens when someone is fired, and bring up a couple of points that you may want to consider when you have to deal with this issue.

Firing an employee is intended to solve a problem regarding that employee’s performance, their conduct, or the financial health of the company. But you also have to consider the impact that a termination may have on the rest of your organization. In most cases you can assume that the employee who is terminated has friends or at least colleagues at work who reasonably infer that the employee has been doing a valued job. If the terminated employee had been in your company for an extended period you can assume that their firing might generate a fair amount fear, uncertainty, and doubt regarding other employees’ beliefs about their own standing in your company. Any rational manager understands that they will be more successful if they have the hearts and minds of their employees. If you are rational and believe that, then when an employee is terminated, you need to quickly communicate a message to the rest of the staff as to what happened (it should be as simple as “Bob is no longer working with us”), some expression of gratitude for the work of the terminated employee (stretch the truth here a bit if necessary- after all, someone in the organization actually hired them to do valuable work), a statement of commitment to the remainder of the staff, and some reasonably accurate prediction of what everyone should expect in the future. Failure to do that, and quickly, will leave a void that will just as quickly be filled with negative speculation, along with lost productivity, lost respect for, and lost commitment to your company.

In cases where there is misconduct, and often when downsizing is necessary, a termination most likely needs to be carried out simply and expediently. In the case of poor performance, you might consider that there’s a good chance that you allowed the behavior to continue for some time without completely clarifying your missed expectations (you’re in good company with the rest of us who are conflict averse), and now you’re faced with the difficult problem of firing someone and not knowing if they might have been able to bring their performance to an acceptable level had you been absolutely crystal-clear about what your expectations were. So here’s the right thing to do: pick out the one, two, or three absolutely objective criteria that your employee must improve, clearly set the performance threshold, establish a time line (a relatively short one) for the employee to attain the threshold level of acceptable level of performance, and have that enormously difficult conversation with them to gain agreement on what has to happen if they are to keep their job. This can create a far better situation: you have done the right thing, the employee knows objectively what their unacceptable performance is and what they need to do to stay, and you’ll either end up with a sufficiently-performing employee, or an ex-employee who shared the responsibility for their termination.

Baby Boomer Ethics

2010 August 23
by mark

The dust is settling on the recent exit of Mark Hurd from the CEO position of HP. There is rampant speculation as to why a high performing executive was asked to leave. Actually, it appears he was paid about $40M to quit, but that’s another story. A number of prominent business people have weighed in on how odd it was that such a high performing guy (another story) was brought down by such a trifling offense. The tabloid journalists have been drooling over the salacious details that don’t yet add up, and we’ve been watching (yet another story).

But here’s what I think is even more important:
- Larry Ellison, the CEO of Oracle, says that “firing” Hurd was the worst decision by a board of directors since the Apple board tossed Steve Jobs.
- Tabloid news talks endlessly about the intrigue and the personal details of the story.
- The hue and cry about the potential financial impact of the decision on one of the iconic American companies has been deafening.
- And no one seems to be talking much about the fundamental ethics of what happened.

Here is what I think is the key fact: Regardless of all of the innuendo and speculation, Mark Hurd apparently was relieved from his duties because he violated company Standards of Business Conduct- one that apparently actually applies to all employees of the company. He embezzled $20,000. The interim CEO, Cathy Lesjak, said in effect that after the Boomer board of directors debated and agonized for quite some time, they decided that he violated the SBC so he was out. End of story. It’s gratifying (to believe, for me at least) that there is an ethical position that a large corporation will take that transcends the consideration of Billions Of Dollars.

If we can believe it, fellow Baby Boomers, this time it may not have been about the money, or power, or status, or the stock price, or image, or scandal, or fellow Boomers in high places, or anything other than a simple ethical decision. That’s, I think, why it seems so strange to us. It might give the impression that this generation isn’t so big on ethics.

Delegation 101

2010 May 11

I’ve been around a number of managers who become frustrated when employees are assigned a task, are given sufficient time to complete the task, and then later seem to have completely forgotten what was delegated to them. For those managers, the following can be a process that changes your life. It’s a simple process that I learned managing large projects in my corporate days. I later realized that it’s nearly universally applicable for anything that needs to get done. It is very simple, but it’s deceptively difficult to execute in a way that is effective.

The basis of this process is a simple action item. An action item is a task that actually needs to get done- one that has high value for your organization, meaning it does need to be done, and since it needs to be done, it carries some time criticality with it. If it isn’t time critical, it likely doesn’t really need to get done, right?

An action item has 3 parts:

1st part: a clear definition of the deliverable. If you’re working with motivated employees, it’s important to agree on the “what” and to be careful of putting too much into the “how”. This is the part that comes easily to most organizations, because we all talk endlessly about what we need to get done.

2nd part: an owner. This is important: you need one owner. Just one. Period. Even if you have two or more doing the task, appoint one person to be accountable. If you don’t do this, when it comes time to have the task done, it’s guaranteed that a fair percentage of the time you’ll have two or more people looking at each other trying to figure out who was actually supposed to do something. One owner.

3rd part: a specific time for the task to be done. This is crazy hard for many organizations because we don’t like to impose what feel like arbitrary deadlines on valued, busy employees. But this is the single most insidious reason that delegation fails: we know when we need something done, but we won’t tell the person to whom we’ve assigned the task when that is. We want to be respectful of their time and priorities, so we project special intuitive powers on them. We want them to perform at a very high level and read our minds. That’s tough for even for your very top performers.

A lot of company cultures struggle with lack of time discipline. This is paradoxical because everything worth doing is time critical. Your customers have time-based expectations, your competition is competent and aggressive- that filters down to everything that you do. So here are some suggestions:
• Declare a new culture: everyone in your company has the responsibility to assign a completion date to everything. Don’t let a task, large or small, be assigned without a time commitment attached to it.
• In the new cultural norm, everyone in your company has the responsibility to impose a task completion date, and everyone who has one imposed upon them has the right to negotiate a different date if necessary. The goal is to have a bi-lateral agreement that works for everyone, not to impose something that is arbitrarily difficult.
• Declare organizationally what “done Tuesday” means. This is oddly important because different people will assume with a great deal of certainty that it means completely different hours of the day (without an agreement, “done Tuesday” usually means on my desk first thing for the requester, and before midnight for the guy who has to do the work) . It doesn’t matter what you choose- just declare it and do it.
• If this process is to work, you need to declare another important cultural shift: one from “beg for forgiveness” to “ask for permission”. Re-negotiation of deadlines and priorities is a certainty- both by the giver and the receiver of a task. “Beg for forgiveness” after a missed deadline means “not important”. Changing this culture is difficult. As the manager, you have to make it happen.

The very important 4th part: follow-up. Shortly after you’ve assigned an action item, with sufficient clarity of task and ownership, and with clear agreement on the delivery date, your employee will get 5 other all-consuming tasks to work through. So will you. If your company doesn’t have a strong deadline-based culture, your lack of enthusiastic follow-up will be construed correctly as a lack of importance. Everything will snap back to normal, and expectations will be missed once again, all over the place. You have to follow-up.

Simple, and subtly complicated: clarity of task, one owner, a completion date, and follow-up. Let me know how it works for you.

Can’t, or Won’t?

2010 May 3

I had a conversation with a friend last week where he mentioned that he’d made a proposal to a business owner and was told “we have no way to compensate you that way.” Then my friend smiled and shook his head.

What does it mean to me when you tell me you “can’t” do something that I’ve asked you to do? It says, to me anyway, that not only you have declined my request, you’ve decided not to tell me why. I may be OK with that, but unfortunately I might also fill that empty space with some assumed bad news about our relationship. That’s just human nature.

I’m all for hard-nosed business and competition. If you succeed because you have a better idea, or outwork your competition, or just run your business better, you deserve it. There are undoubtedly a lot of things you’re asked to do that just don’t make sense for your business. It’s your decision and your right to make those calls. So the next time you need to tell me “no”, you have every right to do say you “can’t.” But be honest, respect my intelligence, and tell me you “won’t.” And if you respect me as someone you want to do business with, be transparent and tell me why.

So Who Do You Talk To?

2010 April 23

I have two questions that I like to ask small business owners when I first get to know them. The second one involves your exit strategy, which I’ll talk about later. The first one is: “Who do you talk to?”

You’re the boss, so you spend your day solving problems. Some have significant consequences- business strategy, staffing decisions, investment opportunities, and a dozen others specific to your business and environment.

So who do you talk to when you have to make a tough decision?

Your business partner: It’s great to have a savvy business partner, but your interactions need to include the ability to have tough conversations that consider diverse perspectives, challenges to entrenched positions, the freedom to bring in other people in your organization to offer up data and new ideas, and the willingness to take risks. In my experience there are potential liabilities to relying on your business partner to wring out tough decisions:
– You’re too much alike in experience and temperament to be able to challenge each other’s ideas, so you tend to lapse into group-think.
– You have unsuccessfully managed the hard calls in the past, so now hard conversations never see closure.
– The partnership is not “equal enough” to allow the dominant partner to be effectively challenged.

Friends and family: Pretty much everyone has a friend or family member that has some relevant business experience. The problem can be that they don’t exactly have an unbiased perspective. People who are close to you are vested in your success, and they’re vested in something more important: their relationship with you. That can play havoc with candor. Plus, do they really understand what your business is all about?

Networking contacts: Most business owners network with other business owners. Even though sometimes they’re competitors, often they’ll share their expertise with you. Or not. In either case, it’s probably difficult to get them invested in your big issues.

Advisors: This is one of my two favorites. You know someone who has gone around the same block a few times you find yourself on, has been successful (make that very successful), and is willing to share their time and insights with you. Find very successful people who are willing to give you their time. Most of them will. Their advice can make you successful.

Consultants: Find a good one- who is committed to your business above everything else (including their compensation). Get them invested in understanding you, your business, and business environment at a detailed enough level where they “get” the real challenges. Someone who is not there as a friend, relative, or competitor, but as an objective advisor.

So, who do you talk to?