Tuesday, October 14, 2008

Need a Profit Boost? Look to your People

We live in a world where corporate profits need a boost. Most companies need look no further than their employees for answers.

With labor and benefits costs rising, companies need to accomplish increasing outcomes without necessarily increasing their workforce.

In every company there are specific value creators which are offered to customers. As I have written before, these value creators should most definitely be understood and expressed in terms of the realized benefit received by customers.

I refer to these as outcomes. In every company, there are specific activities that the employees in these companies do that clearly impact the delivery of these outcomes to customers. These activities contribute to and create the actual value delivered, the outcomes.

In an environment where there is a decreasing number of available skilled workers necessary to make the appropriate contributions to achieve customer outcomes, there will necessarily be increasing competition for those individuals, thus much greater opportunity of choice for those individuals for employing their strengths in the marketplace.

We have discussed that to find, and to keep good employees in that market, companies will have to offer a whole lot more than money, security, and likeability. They will have to offer an opportunity that brings with it the real potential for self actualization for the employee. The company will have to have a vision to accomplish something deemed by the employee to be significant, at least worthy of his/her investment of his life energy as part of that self actualization.

This vision, in combination with the strengths, aspirations, and passions of individual workers, creates an infinite number of possibilities. It will be dynamic, as the market is dynamic, customers are dynamic, and the workers tasked with its delivery will be dynamic. This provides the foundational strength of the organic model over the mechanical.
My book, The Squaredime Letters, is published.  The feedback has been phenomenal.  If you want to get your head around the real forces behind our current recession, you must read this book.  Check out some content on Amazon.  

A Thinking Democrat Rejects Party Policies: Rothschild Rejects Obama

Democrat and former Hillary supporter, Lady Lynn Forester de Rothschild, rejected Barack Obama, the class warfare elitist, to offer sincere support for John McCain. Her intelligent and well explained decision turned heads.

One of those heads belonged to none less than CNN's Campbell Brown. Brown determined to take Rothschild to task. In an exercize of utter futility, Brown used her "unbiased" news reporter platform in attempt to confound Rothschild's impeccable logic.

Watch how Campbell herself can only resort to ad hominem attacks, using the labels like "bitter" in effort to support her obvious disdain for Lady Rothschild's conclusions that Barack Obama, and current democrat political posers, attempt to foster class warfare in America. This is their only hope to remain electable.

The piece is titled, "Lady Lynn Forester de Rothschild gets schooled on CNN" but this title is just another example of pure political posturing. Watch this piece yourself and you'll see that it was actually Brown who "got schooled."

As I have written, and Lady Rothschild has supported in this interview, there can be no benefit to the American Ideal or prosperity to be gained dividing social and economic classes.

In my post from Sunday October 5, 2008, Capitalism's Potential for Income Inequality: Scourge or Benefit, I wrote about the problem Obama and Campbell believe Democrat policies will improve, that is the problem of increasing income inequality.

You can see that elitism and class warfare as practiced by Obama and Democrats are actually the forces that feed the very problem they "claim" they want to address. This is pure myth because they have no intention of producing a solution. By improving the incomes of their "so called" lower class effectively, they would erode the very voting block they depend on to hold on to the power they really want.

Recognizing individual productivity and the delivery of value as the key to improved income will eliminate the "need" for government programs to protect underproductive and potentially unnecessary workers. It would foster a productivity revolution which would undermine the income redistribution principles upon which Democrat platforms are founded.

Democrats themselves would be forced to resort to productive ideas and policies. Their productive constituency would require it.

Sounds like a timely idea.

CJ Coolidge is a regular contributor to HRTools.com.
Get your own copy of his groundbreaking book, The Squaredime Letters.
Visit CJ online at www.cjcoolidge.com.

Sunday, October 12, 2008

The Future of Employment: Maximizing the Value of Employer and Employee

(This is the 6th and final installment in a series of articles about the problems associated with government's attempts to ignore free market principles in a free market world ecomony.)

The solution for all the economic and social woes we face will naturally occur with the improved understanding of value.

The World of Employment Will be Enhanced by Understanding Value.

Let me describe an entirely new relationship between a business owner and the employee which will raise everyone’s standard of living, and reduce the gap between the "haves" and the "have nots." As I have said, everything revolves around the understanding of value. Value can no longer be associated with time, with products of services as ends in themselves. Value must be aligned with the realized ability of a product or service to improve the life conditions for the buyer.

Value for an employee must be seen in the same way. An employee, recognizing the responsibility to provide value as the foundation for determining a worthy wage, must realize, then appropriately communicate, how his participation does just that.

The Employee Approach to Job Search will be Changed. Earnings will be Improved.

Employees will no longer be interested in merely trading time for money. They will be more concerned that their companies, and their company’s customer, are able to be positively and recognizably impacted by what they do. "Getting a job," as though an employee is taking something from someone, will be replaced by rendering a service, as though an employee intends to make a real and recognizable contribution on his company and on the company's customers.

The Employer Approach to Recruiting will be Changed. Earnings will be Improved.

Employers will stop recruiting for positions, too. Instead, they will be communicating their vision and mission, their reason to exist, and will be seeking good people who can align themselves to the completion of those missions.

Employers will not be looking for people to put in positions, so much as looking to discover the impact of having a particular person at work to fulfill the company's mission, and to serve its customers. Employers and employees alike will not want to exchange money for things done, so much as for measurable impact of the things done. This will automatically raise the earnings for an employee’s service as he or she is able to raise the profitability of the employer. Job security will be of little concern.

Great employees who make contributions to the profitability of their employers will be desirable everywhere. Once an employee knows his best contributions, and is able to produce them confidently wherever he is placed, he will have confidence enough to know that will eliminate his fear of serving where there is a mission to be fulfilled.

The More You're Worth, The More You'll be Paid. The Greater Your Impact, The Greater Your Compensation.

Once value is understood in the mainstream of our economies and our lives, it will start to make no difference what any other person is paid. It will be understood that one's pay will be less than the contribution made. Whether you are Roger Clemens, Lebron James, Bill Gates, or John Doe, once you understand how to look for and deliver value, you will begin to earn in accordance with the value you provide, and to your heart's desire.

This is the key to a better future. It is the solution to most every economic and social problem. It is the only way that our long and well developed capitalism can endure. It is the best way to correct perceived income inequality.

We may not remember that there is no "free lunch," but remember we must, if we are to survive.

CJ Coolidge is a regular contributor to HRTools.coms.
You can now get your own copy of his groundbreaking book, The Squaredime Letters.
You can vist CJ online at www.cjcoolidge.com.

Friday, October 10, 2008

Misunderstanding the Value Equasion: Wrong-Headed Teaching in Wrong-Headed Schools

(This is the 5th installment in a series of articles about the problems associated with government's attempts to ignore free market principles in a free market world ecomony.)

There should be little mystery about why the concept of value is so far off base. From our earliest training, we were taught to misunderstand it.

It Started in School. Purpose: Produce Workers for the Industrial Machine

We built a system by which masses of people could be trained to become tools in an industrial machine. Around the end of the 19th century, John Rockefeller, Andrew Carnegie and John Dewey aligned to create the system to produce the workers they needed to participate in the newly developing American industrial economy. And it worked wonderfully. America became the greatest industrial force the world had ever seen. By the millions, American workers entered the workforce, traded their time and their lives for paychecks, and, in doing so, forgot the central meaning of value.

Value became erroneously, acceptably, and inseparably connected with time, and with task.

For at least 2 generations, the definition was reinforced, solidified by story and culture, respected as the "backbone of the economy" as if getting and keeping a job was the prize, and the best economic contribution an American could make. People worked for 40 years, retired with a gold watch and a pension, and died within 5 years.

Generations of Americans were trained to believe that the highest contribution they could make was to have, and to keep a job. In fact, our very identities continue to revolve around this idea. The seemingly most important first question asked when introduced to a new person is, "What do you do?" The main reason parents give to support their children's success in school is that this will enable them to "get a good job."

We Keep Following the Model, Well Beyond its Benefit.

So things went, and so they continue. As long as America had a fairly stable, predictable demographic, and no international competitors to speak of, the system could successfully continue. We continue to follow the Carnegie/Rockefeller/Dewey education system, even better than ever. We admire it, require it, fund it, protect it, and demand it. That very system continues to produce more and more of exactly what it was designed to produce: people who believe a job to be the economic end game, people who associate time with money, and don't understand value. The System Was Created for the World as it Existed in 1940.

The Foundations Have Changed

The basic essential conditions which enabled our education system to produce the necessary contributors to achieve American Industrial greatness no longer exist. The demographic model is completely different. Technology supports quality international competitors for everything we produce. And it is no longer beneficial to have millions of people who don't understand value. In fact, it is detrimental to our survival. It is proverbial that America needs to improve the public education system. All politicians say it. They just don't know why, or how. Their own models are merely copies of the acceptable ones of old, with more bells and whistles. They still motivate students with the prospect of securing a good job upon graduation.

We Will Never Change the System if We Keep Listening to its Trained Advocates

Adding to the problem is the very leaders of the educational institution themselves. These are professional educators, 2nd and 3rd generations of people educated by educators, not educated by real life, or by real economics.

The people who have such a vested interest in the preservation of the very system that creates the economic problems we are beginning to face are the same ones who haven't a clue about the way things really work. They are so separated by time and space and education that they actually believe the unworkable utopian, anti-capitalistic solutions they are now building into the millions of Americans they touch.

Yes, America needs to improve our education system, but very few can even anticipate the extent of the alteration required. Still, at the core of the educational change, will be the understanding of value. We are far from this.

I heard a Comment by John McCain Which Offered a Glimmer of Hope.

I heard this in John McCain's speech at the Republican nominating convention. He was speaking about some of the systems we try to preserve in our country today.

"I know some of you have been left behind in the changing economy and it often seems your government hasn’t even noticed. Government assistance for unemployed workers was designed for the economy of the 1950s. That’s going to change on my watch. My opponent promises to bring back old jobs by wishing away the global economy. We’re going to help workers who’ve lost a job that won’t come back, find a new one that won’t go away."

McCain is talking about the need to educate our people in a way that fully understands the concept of delivering value. As the world changes at hyper-dynamic speed, the old beliefs and systems that were undergirded by those beliefs need to change.

Value must be understood. People must take personal responsibility to continually update their education so that they can stay current in this ever changing world.

CJ Coolidge is a regular contributor to HRTools.coms.
You can now get your own copy of his groundbreaking book,
The Squaredime Letters.
You can vist CJ online at

Tuesday, October 7, 2008

The $800 Billion+ Economic Solution: Does Anyone Really Know What's Going on?

I feel used, lied to, abused. . . and though I've been reading about it, and listening to as many of the talkers as I can stomach, I still don't know exactly what Congress did in passing the so-called $800+B "Rescue Plan" or "Bailout." This leaves me very uncomfortable.

Our US economy doesn't function in a vacuum. It actually reflects the condition of the society it serves. Ours may be weakening, even cracking.

Democratic Societies have Chinks in their Armor.

Scottish historian, Alexander Tyler, wrote something like the following in the 1770s regarding the US experiment in democracy. It is worth thinking about in light of the current economic situation.

"A democracy is always temporary in nature; it simply cannot exist as a permanent form of government. A democracy will continue to exist up until the time that voters discover that they can vote themselves largesse out of the public treasury.

"From that moment on, the majority will vote for themselves candidates who promise the most benefit from the public treasury, with the result that every democracy will eventually collapse due to loose fiscal policy."

"The average age of the worlds greatest civilizations from the beginning of history, has been about 200 years. During those 200 years, these nations progress through the following sequence:
  1. From Bondage to spiritual faith;
  2. From spiritual faith to great courage;
  3. From courage to liberty;
  4. From liberty to abundance;
  5. From abundance to complacency;
  6. From complacency to apathy;
  7. From apathy to dependence;
  8. From dependence back into bondage."
Methinks that we have transitioned through the 4th, 5th, and 6th all within my lifetime. We sure seem to be rapidly transitioning through the 7th now.

Creating Crises as a Means to Consolidate Power

There was a work composed between WWI and WWII which presented a means by which individuals or institutions could successfully wrest power in a democratic, potentially populist system. It made the case that if one could create difficult situations, challenging the security of the society, and then become the "source of solution" for the situation, the voters would move to surrender their liberties in favor of the delivered security.

I can't validate my sources at present, but I have read that Hitler followed this method in post WWI Germany to secure his position with the full support of Germany's electorate.

I fear similar patterns are at work in the USA today.

I have considered that the Savings and Loan Crisis (1980s) was largely created through legislative fiat, and "solved" by "congressional action." I wonder if the current situation isn't strangely similar.

Congress pressed for a social policy to define home ownership as a "right" during the 1990s. Part of this "policy" encouraged financial institutions to embrace "less-than-prudent" lending policies, and even pressured many to create loans counter to "more prudent" credit wisdom. After a few years of this, they required other creative maneuvers in an attempt to maintain solvency. The "house of cards" couldn't stand forever. A volitile stock-market caused liquidity to evaporate exposing the imprudent lending practices.

Yes, opportunists developed ways to maximize their own gains in light of the policy. And, yes, obfuscation, false valuations and other bad practices resulted. But for the media, the legislative and executive branches of government to place the blame wholly on financial institutions and corporate greed is, at best, incomplete, and worse, irresponsible.

Was the Bailout Just Shoved Down America's Throat?

This absolute "in your face" created crisis ushered in rushed emergency acceptance of this $800+B "rescue plan," a plan passed by the very institutions which created much of the problem in the first place. They shoved it down the throats of constituents who overwhelmingly asked them to consider something else. I, for one, feel taken.

Those "public servants," individuals with the power to create, then blame, then "fix" the problems, aren't economists. Most aren't even businessmen. They may not even be good capitalists.

Except for that degree in law, I am as intelligent as most of our legislators. As is true for them, I can't claim full understanding of world economic dynamics. I don't fully understand how global financial markets interrelate. I don't grasp the totality of the negative effects of a lack of liquidity. I don't grasp fully the potential effect of letting the market make its own correction.

But unlike these lawmakers, I don't believe that the principles at work are so complicated that they cannot be explained well enough for me, and others like me, to adequately understand what this new policy is, how and why it will work, leading, even me, to understand why it is acceptable and necessary.

Trust is Deteriorating Beyond Repair.

John Stossel said that a crisis creates the best opportunity for power seekers to seize power. I can't help but think that this is exactly what has been occurring over these past several years, coming to a head over the last few weeks.

Washington needs a significant house cleaning. But that can only occur if the now complacent, apathetic masses, who seem to be becoming more and more dependent, can turn back the clock, and find the courage to lead the country back into days of real liberty.

Nobody will be happy if we continue on the path from to dependency, right into bondage. I certainly won't.

Monday, October 6, 2008

Income Inequality: Corrected Through Understanding the Concept of Value

(This is the 4th installment in a series of articles about the problems associated with government's attempts to ignore free market principles in a free market world ecomony.)

Misunderstanding the Concept of Value.

What is the real force behind the problem we associate with the inequality of riches? It is, simply, the lack of universal understanding of value. We don't understand what it is, and we don't understand how to create it.

Value is simply, and only, the realization of a greater benefit than the resource expended to secure it. It is the enhanced well being of one realized from the contribution of another.

Value, in economic terms, has the mystical ability to be realized on both sides of a transaction. In fact, in an appropriately negotiated transaction, both parties will gain value, both will be benefitted. A transaction with only one beneficiary is simply theft. To be willing to buy the services of another for a price, I will realize that the benefit I gain is worth more to me than the money I give to secure the service. The service provider will realize that the money he receives is worth more than the time, effort, or material he expends to deliver. Such transactions are accomplished in the free market every day. Give and take. Value given, value realized, value returned.

The Higher the Value Realized, the Higher the Value Given - The More it's Worth, the More you Pay.

Why does Lebron James receive $19MM in endorsements before his 20th birthday? Because the companies making the offer will receive more than $19MM in benefit for what Lebron provides. Does he deserve it? Yes, once you understand the principle of value. If a major league baseball team can earn $50MM in enhanced profitability by obtaining the services of a gifted athlete, why wouldn't it be willing to invest $20MM to get him? Without making that investment, they miss the $30MM differential. To make the decision to not buy the players services would cost the franchise, and be a poor decision. Is the athlete overpaid? Not unless you don't understand value.

The same holds true, even for a commodity. Oil is a commodity. OPEC may control the price of oil, but their controls are only as strong as the value that oil has in the market to which they sell it. Their prices will only stand if someone else is willing to pay what they ask. And, in the case of oil, until the price of the resource exceeds the value produced by using it, the price can rise. It's as simple as that.

Value Has Nothing to do With the Product, the Service, or the Time Itself.

Some would argue that professional athletes are "overpaid." Here's the reason that the issue is an issue at all. We have erroneously determined to quantify the appropriate wage based on the actual task being done, not on the value of the impact of that task upon a particular company in a particular market. We have assessed a wage based on some assigned value of time, not on real value delivered.

After learning that Roger Clemens would be paid $18MM for pitching 1/2 a season, we make activity based value assessments. He might pitch in 20 games. He might throw 100 pitches per outing. That's only 2000 pitches. In activity terms, we might say Roger Clemens would be paid more than $9,000 per pitch.

If this bothers you, you must realize that you don't understand value at all.

Roger Clemens may have pitched, but he isn't paid just to pitch. He is paid to improve the conditions for the franchise willing to pay him. He is paid to be Roger, and to give the team whatever things come from his participation. Roger Clemens fills seats. People come to see Roger pitch. That accounts for something. Roger Clemens helps the team win. He helps less experienced pitchers. He brings a championship mentality to the team culture. These help the team win games. This fills seats, sells beer and hotdogs, advertizing, and on and on. Roger's employment is a value creator for a sports franchise.

It's the same for all professional athletes, for actors, for musicians, for lawyers, for producers, for business builders. Each of these gains substantial financial rewards which are always less than the value they contribute to their employer or the direct customers they serve.

This bears repeating: The financial reward realized, a workers compensation must always be less than the value they contribute to their employer or the direct customers they serve. Always.

Why is Your Compensation so Small? Why is Anyone's?

So what about all the other, little people? What about the "increasing" gap between the "haves" and the "have-nots"? Shouldn't this be adjusted? I won't argue the point. It would be a tremendous benefit to all of us to bring up the individual standard of living for all of us. And, I believe, it can be done. . . but not as long as we continue to misunderstand and misrepresent the concept of value.

We are our own enemy in this effort. We continue to create and maintain the very vehicle which proliferates the problem.

CJ Coolidge is a regular contributor to HRTools.com.
You can now get your own copy of his groundbreaking book, The Squaredime Letters.
You can vist CJ online at www.cjcoolidge.com.

Sunday, October 5, 2008

Capitalism's Potential for Income Inequality: Scourge or Benefit

(This is the 3nd installment in a series of articles about the problems associated with government's attempts to ignore free market principles in a free market world ecomony.)

There is Nothing Wrong with Capitalism.

The American Heritage dictionary defines capitalism as an economic system in which the means of production and distribution are privately or corporately owned and development is proportionate to the accumulation and reinvestment of profits gained in a free market.

This is not a hard concept to understand. In a capitalist system, private citizens are permitted to own the means of production, the capital, and can freely invest in that capital out of the increased production, or the profits returned. The more they invest, the more the capital can produce, the higher the profit, the higher the standard of living. Good picture.

Income Inequality: Scourge or Benefit?

I do not defend the companies whose poor compensation strategies allow their executives to be paid untold millions even as their enterprises fail. There is no excuse for this. It is an abomination and an aberration to appropriate capitalism.

The knock, particularly on American capitalism is the apparent inequality it seems to produce. There are a relatively small, but ever growing number of executives and entrepreneurs earning millions while millions of others are earning a relatively small amount.

Remember basic economics. For economic stability, all participants in the economy must provide some contribution to the economy in proportion to the resources they consume.

However, because of age, or infirmity, or whatever, some percentage of every population will not be able to contribute in proportion to their consumption. By the same token, some percentage will be capable of producing more than they need. The balance is struck when the production of the more capable can be allocated to serve the needs of the incapable. This is what happens when a father produces enough to feed his children, as of yet too young to produce for themselves.

This is exactly the condition that has occurred in our well developed capitalist system.

There are the relative few who, through investing in the capital they have purchased and improved, produce substantially more than they need. It is because of this group that our standard of living is ever increasing. There are more who, not wishing to shoulder the risk and responsibility of capital acquisition and improvement, make other, smaller contributions, roughly equivalent to the resources they use, and consume. And there is a yet smaller group who cannot, or will not produce as much as they use or consume. All benefit from the high standard of living available in this country, perhaps the highest in the world.

The Real Conditions Behind Income Imbalance

As I have said, there is an income imbalance. It may even be growing, and may even be a problem, worthy of correction. But the current approaches deny the realities at work, some going so far as to destroy the conditions which encourage the improvements of the quality of life which we all enjoy.

Capitalist Income Imbalance is Essential, Even Good.

The cause of any economic imbalance and its potential remedies are being erroneously identified. Greed and injustice are blamed. Those few who "overproduce" are being accused of performing some injustice. Their "over-production" is viewed, not as the positive contribution that it is, but as some ill-mannered, inappropriately realized gain.

This thinking ignores this important reality: Their production is voluntary. These "over producers" could, just as easily, choose to produce only what resources they use, or consume. They could choose not to invest, and, therefore, not contribute to increase the standard of living for us all.

Legislation and Regulation: A Dangerous Way to Correct the Situation.

With this perspective, increasing law and regulation become the tools used in effort to correct the situation. Investment is penalized. Earning is discouraged. Progress is thwarted.

This approach can only destroy an economy. Eliminating high producers will reduce the resources available, and the improvement of the capital, the means of production, which will lead to a decrease in the standard of living for a growing population. Law and regulation can be used to minimize the imbalance, however. The playing field could certainly be leveled. But, doing so will reduce the productive capacity as the population grows. It will put the economy in decline.

I don't care how socialist or utopian you may be, you don't want the USA to become a 3rd world, simply balanced, economy.

The next installment will offer real practical considerations to the perceived problem of Income Inequality. It has to do with connecting compensation to productivity.

CJ Coolidge is a regular contributor to HRTools.coms.
You can now get your own copy of his groundbreaking book, The Squaredime Letters.
You can vist CJ online at www.cjcoolidge.com.

Friday, October 3, 2008

Capital: The Key to Economic Survival, and Improved Standards of Living

(This is the 2nd installment in a series of articles about the problems associated with government's attempts to ignore free market principles in a free market world ecomony.)

No matter what we may think, the world economy is a free market, even capital based, economy.

Basic Economics 101

For any government/state system to exist, and maintain, it must have an associated economy which can make available, at minimum, the basic necessities and consumables for its citizenry. For economic stability, the participants in the economy must provide some contribution to the economy in proportion to the resources they need.

As a population grows, so must the availability of these necessities and consumables. More people require more food, more housing, more clothing, et al. And, to the degree that the consumer/participants maintain a suitable level of contribution, the economy maintains a balance, and is sustainable. If this condition is met, the standard of living can be maintained.

However, in this modern age, simply maintaining the standard of living is unnacceptable in most economies. But an improved standard of living, by definition, requires an even greater availability of resources for each member of the population, and, therefore, an associated increase in production offered by the participants.

Capital is the Centerpiece of all Economies: Improved Capital Means Improved Productivity. Improved Productivity Means Improved Standard of Living

Increased production comes from the development of improved means of production. And, means of production is, by definition, capital. To cause the means of production to increase in its ability to produce, hence an increase in the standard of living, there must be an investment of some sort, capital investment.

Restated, since all economies require some means of production, they must be said to be capital based. Since all economies desire an increase in their standard of living, there must be capital investment.

Even Non-Capitalist Economies Require Developing Capital

Yes, Virginia, it doesn't matter what China, India or Middle eastern countries call themselves, communist, socialist, facist, capitalist, or whatever. It doesn't matter that their own domestic economies aren't considered free market, capitalist economies. The world economy, at its core, is a free market, capital based economy, no matter who controls the means of production.

A socialist country may own the means of production. But, the means of production is still capital, A government may "control" the earnings of its citizens, but those citizens must still have access to sufficient resources to secure the things they need for the economy to exist. If a particular economy's consumption needs exceed the availability of available resources, that economy, hence the system it supports, cannot survive.

And in order for even the socialist economy to exist, to improve the standard of living demanded by its citizenry, there must be capital investment. It logically follows that the governmental system that does the most to encourage investment in capital will obtain the greatest increase in production, and improvement in its standard of living. Such has been the experience of the nations who espouse the economic system called Capitalism.

Recognize these Principles at work:
  • An economy can be stable only when it is able to produce and deliver the goods and services necessary to support its population.
  • Economic balance occurs when the participants produce at least what they consume. A simply balanced economy maintains a stable standard of living.
  • The standard of living increases when production exceeds what participants use or consume.
  • Productivity is effected by the means of production, by definition, capital. When capital is improved, the standard of living is improved. When capital is diminished, the standard of living is diminished.
  • The basic element by which capital can be improved is investment. Every economy, no matter its form, is subject to this principle.
  • Economies that discourage investment in its capital inherently diminish their ability to improve the quality of life for its participants.
Capitalism provides the only means by which a society can improve its standard of living. It isn't the enemy. It isn't even the problem.

But there are knocks on capitalism, one I will discuss in the next installment.

CJ Coolidge is a regular contributor to HRTools.coms.
You can now get your own copy of his groundbreaking book, The Squaredime Letters.
You can vist CJ online at www.cjcoolidge.com.

Tuesday, September 30, 2008

The Value of Work is Inextricably Linked to its Impact

(This is the first installment in a series of articles about the problems associated with government's attempts to ignore free market principles in a free market world ecomony.)

There is no free lunch.

It seems an obvious foundational principle to all things business - at least all things business in our capitalist system. Somehow, somewhere along the line, we seem to have forgotten.

We have started to believe, even in business, that we are entitled to something, simply because we are. We live and act and conduct our enterprises as though we are entitled to remain profitable on the basis of our existence, our history, the size of our assets, or the supposed quality of our product. Employees think that they should continue to be paid just because they show up, and do some work. It doesn't work that way, and it never should have.

Can you say that any job/activity has quantifiable, intrinsic value?

I once heard Hillary promise to use government programs to guarantee jobs to the manufacturing workers in the northeast. I once heard Obama say that he will do the same to restore the jobs of auto workers. They speak as though they believe that any and all workers should be entitled to be paid whatever they need, doing whatever they can, without considering the real value of their work for the company or the customers they work to serve. These people act like one can dictate prices and wages, without regard for the associated value of the products or the service provided. They are deceived.

Anyone believing that there is intrinsic, quantifiable, fixed or naturally escalating value in performing the tasks themselves is equally deceived.

What Determines the Value of Work?

What dictates the value of the work done by an auto worker, or anyone, for that matter? What guarantees him or her a position by which wages can be justly deserved?

Only the value of the contribution the position makes to the product or service produced, and the customer who buys it.

When that contribution does not exceed the value available, recognized, delivered, received, and desired by customers, that work is no longer worth doing. The worker can no longer expect to continue to be paid for his services. The work is no longer valuable, or necessary.

At one time, thousands of people were gainfully employed as elevator operators. The landscape changed, and elevators became automated. Attempting to maintain that the elevator operators of the world should continue to be paid for operating elevators would be pure foolishness.

Why are there no more people employed as elevator operators? That service is unnecessary.

Attempting to maintain that any job should be preserved, "just because so many people do it" is equally foolish. It is nothing short of a "free lunch."

The same principle is at work in every industry, in every healthy economy.

This same mentality will produce disastrous, protectionist policies to be imposed on a world economy. They won't work. They can't work. They never have worked in a free market economy. And, no matter what we may try to tell ourselves, the world economy is a free market, even capital based, economy.

Somebody will pay, even for a "free lunch." And whatever the cost, it exceeds the value received. It is a bad deal.

Sunday, September 7, 2008

Beware of Business HIV: It's On the Rise

The less you pay, the better the deal. Right? The less time you spend, the more money you save. Right? These precepts are the foundation of a creeping business virus I call the Hidden Inefficiency Virus or Business HIV.

At its most fundamental DNA, Business HIV is the average individual’s response to too much and contradictory information. Needing to make decisions that guard profit and no longer having a grasp on the millions of pieces of data that dart in and out of their field of vision, business people have settled into a way of thinking that makes them wrong often but rarely willing to admit that they’re wrong. Doing so would require more in-depth study of data than they feel they can do. Sticking with saving money as the bottom line seems like the wisest course of action to many decision-makers.

Economic, human and social realities fly in the face of this sort of out-dated logic, however. The more time you spend investigating your own needs and the offerings of different vendors, the more money you can save – not only in the purchase but also in the long-term. The more money you spend on individuals with specific expertise, the more money you are likely to make as your operations improve.

Business HIV removes the real logic and replaces it with a sense of false scarcity and urgency. Business HIV is an emotional and intellectual disease that prevents decision-makers from seeing how off course they really are. It’s ego, comfort, fear. . . and it’s just plain illogical.

The remedy to Business HIV is a restructuring of the big picture. A realization that costs such as energy, taxes and insurance are spiraling and they’re not going to come down. Competition is more rampant than ever in the history of commerce as Third World countries replicate everything better and cheaper. A new strategy based on people creating profit through innovation is the only antidote to Business HIV.

Are you ready to move from a sick mechanical business model to a healthy organic business model? Are you ready for that shot in the arm?

CJ is a regular contributor to HRTools.coms.
You can now get your own copy of his groundbreaking book, The Squaredime Letters.
You can vist CJ online at www.cjcoolidge.com.

Wednesday, August 20, 2008

Often Wrong, Never Unconvinced

I grew up with a certain amount of arrogance that's tied to a perception I have about my own intelligence. I suffer from a malady described by Dr. McFarland in 1961. I am often wrong, but never unconvinced. You may benefit from a realization that the same situation pertains to you, or to others you work with every day.

Choosing to recognizing it can help you make better decisions and do better business.

Here is a small portion of a talk that I gave recently describing this phenomenon.

You can visit CJ online at cjcoolidge.com.

Wednesday, July 9, 2008

Do You Know too Much to Increase Your Profitability?

In 1267, Roger Bacon published his Opus Maius, an 845 page work, said to contain all the knowledge in the world. Imagine that. All the knowledge in the world in a single person, and in a single volume. You'd have to be a teenager to make such a claim today.

In 1961, before the dawn of Moore's Law, and before the proliferation of the silicone chip, Dr. Kenneth McFarland wrote that there was already a veritable information overload, such that a seeker could often find entire sets of developed knowledge in direct contradiction of other entire groups.

The only way that a person could hope to avoid inaction and indecision caused by confusion due to such disparity of truth would be to limit the intake of information, and the type of source for information.

Dr. McFarland said that such a defense strategy would necessarily produce individuals who would be "often wrong, but never unconvinced."

In January, 1999, UNESCO reported that there were some 869,000 books in print. By December, that number had jumped to 1,963,000. The pronouncement that, for the first time in verifiable history, human knowledge had more than doubled in less than a year.

With Moore's Law in full swing, there have been at least 30 doublings since Dr. McFarland's pronouncement in 1961, and 6-8 doublings since 1999, when UNESCO reported its findings.

To whatever degree Dr. McFarland's observation could have been observed to be true in 1961, there can be no doubt that it is certainly true today, true of more people, and true more often.

More than in 1961, today there are multiples of bodies of information in direct contradiction to other bodies of information.

How else could NASA Scientist, James Hansen assert that oil company CEOs should be tried for crimes against humanity for their contribution to "Global Warming" now called, simply, "Climate Change." At the very same time, meteorologist and founder of The Weather Channel, John Coleman, wants to sue AL Gore for financial fraud in order to "expose [his] fraud of "global warming." You can't get any more diverse with these "bodies of information."

There are thousands of other examples.

As to the tendency to limit the types of sources from which we learn: Well, some listen to Rush Limbaugh, others to Al Franken. But nobody listens to both. What about the blogosphere? Some read Townhall.com, others DailyKos.com, but nobody reads them both.

How else could we find our political system so polarized?

Now I'm not advocating that people need to become open-minded. And I'd be the last one to say that every position is valuable, or even worth consideration. What I am saying is that if Dr. McFarland could report way back in 1961 that people are "often wrong but never unconvinced," that the situation is multiplied many times over today, particularly in the entrepreneurial world.

The average entrepreneur, small business owner, is dangerously susceptible to this condition. With ever increasing distractions and decisions, the opportunity for error is increasing by the day. The occurrence of error is increasing every day. But the error is invisible. (The decider is convinced that he is right!) As a result, the inefficiency created, will also be invisible.

I've started calling this condition "Business HIV." It's the "Hidden Inefficiency Virus." It's the situation in which a business builds inefficiency into the very business model. It's what a 2008 Reuters report says about a software business that spends 10x more "fixing" than "producing."

You might have Business HIV if:

  • You feel relieved when an employee quits, knowing that your payroll expense will be reduced while the position remained unfilled.
  • You reported to your board that you had cut your health insurance plan increase in half; You didn't report or realize that the cost of the use of corporate resources exceeded the value of the reduction.
  • You handle harassment training by making your employees watch the inexpensive generic videos. It was "affordable" training, too, so long as you don't recognize that you wasted an hour of time, energy and focus boring them to death, and accomplishing nothing important. Well, you did check a box on some compliance checklist.
  • You try to take every offer from a vendor/associate to the simplest form so that you can "shop it" and minimize your expense. You believe that all those "value adds" are just excuses to get you to pay more than you have to.
  • You assume that, if Peter Drucker said it, it doesn't apply to you.
  • You believe that the less you pay, the better the deal.
  • You believe that if anyone could take two weeks off from the job, you really didn't need them anyway.
  • You measure and monitor your sales cycle, but not your attrition.
  • You believe turnover is a "soft cost."
  • You don't believe that your company can afford to hire great people.
  • You believe outsourcing is a way to get another company to do the same things you used to do yourself, for less.
  • You believe that outsourcing is a stopgap, a temporary way to handle things that, when you get big enough, you can bring them back in house.
  • You believe that sometimes it costs too much to do it right.

The pressures of today's business world don't tolerate the same level of inefficiency acceptable in days gone by. "Often wrong" then, happened far less often, and had far less impact than "often wrong" today. And "never unconvinced" just looks stupid.

Half of being smart is knowing what you're dumb at. Then, find somebody smart, and let them handle what they're smart at. It is a lot more efficient.

Visit CJ online at cjcoolidge.com.

Wednesday, June 18, 2008

My High Cost of Not Outsourcing

If it isn't part of your central value, it ought to be outsourced.

I couldn't be any more convinced. Not doing so causes me more time and focus waste than I can afford. I can't afford doing thigs that I am not gifted, resourced, talented, or interested in doing.

Today my hard drive failed.

I turned my HP laptop on this morning. The little power lights illuminated. Then, they shut off. Then they illuminated again. Then they shut off. A 3rd time, they illuminated. A third time, they shut off. Before it happened a 4th time, I pressed the power button . . . an attempt to start over, fresh.

I removed the battery and the A/C power connection. I waited 15 minutes.

I re-inserted the A/C, and re-launched the machine. Nothing had changed.

I did notice that the light which indicates that the hard drive was spinning was not lit.

OK. This is not good. I have seen hard drive failure before.

I called the warranty service group. They asked me to repeat what I had already done. No luck.

"We will send you a lable so you can send us your machine."

"How long will that take?"

"You will have the label in 3-5 days."

"How long will you have the machine?"

"We will have it for 7-10 days."

"And then?"

"We will send it back."

So, in the perfect world, if 'everything' works, I won't be able to get back into full service for at least 2 weeks.

What if the hard drive needs to be replaced? That's easy. I'll just reinstall my backup. Whoops, I don't know how. I guess I can learn, but it will cost me another couple of hours, not taking into account the hours it will take for the data transfer.

What will this cost me?

From the mechanical model perspective, maybe nothing. The postage is paid, the warranty covers the service. They'll even replace the hard drive, everything good as new.

From the organic, real perspective, it will cost a small fortune.

There's the direct time I need to "waste" fiddling with the machine. With all the time invested, the best result would be a return to equilibrium. Time and focus invested, noting gained.

There's the opportunity cost for what I would have otherwise been doing during the direct time.
There's the opportunity cost for the things I will not be able to do because I don't have the machine.

There's the cost of the total lack of focus, and the distraction. You see, this morning I was to finish the composition of my latest speech, one I had started yesterday, a breakthrough presentation based on an inspiration I received this past week, to be delivered at a major event early July. That one speech could be worth $ thousands. But, as we creative folks know, I could lose it if I don't finish it while inspired.

Wait, with the distraction and frustration of the morning, I have already lost a good deal of that inspiration. I think I'm going to be sick.

I needed an IT outsource.

What I need is an IT outsource to make sure that my systems are what they need to be, how they need to be, and where they need to be. I don't need a full time IT person, neither do I need a quick fix technician who will get his initial look at my system only when he sees it not working.

What would a good outsource have done? I don't know all the details, but I do know this. I would have made a call to someone who knew the who, what, where, when, and why behind my little IT operation, and then I would have been able to relax. In just a minimal amount of time, I would be back in business, minimizing my distraction and down time. I would complete my inspired project. I would hardly stumble through the day.

As it is, my mechanical, cost saving approach is going to cost me a fortune.

Wednesday, June 11, 2008

Rigidity: Bad for Engineering, Bad for the Economy, and Bad for Business

Rigidity has never produced a structure capable of good function in an environment of changing conditions.

  • Skyscrapers are designed with the ability to "sway" in the wind, or to "flex" in case of an earthquake.
  • The wings of the great airliners are designed to "give and take" in the face of changing air density and current so that the body of the plane can maintain maximum stability in turbulence.
  • Bridges, towers, roads, ships are strengthened with flexibility.
Attempting to eliminate this "flux" with rigidity would result in disaster.

It works the same way when attempting to develop increasing profitability, or human capital. Rigidity kills.

Why, then, do presidential candidates like John McCain, Hillary Clinton, and Barack Obama continue to press as though greater centralized control and rigidity offers anything of a benefit to America's economic strength in the face of ever changing conditions?

Why do so many otherwise intelligent Americans fall for the same tripe?

The Answer is simple. They all must be ignorant of the way things really work. Or, maybe, it's a power thing.

As I will continue to suggest, whatever economic conditions may seem to create problems for our society, each is solved when individual participants learn to contribute in a value producing and meaningful way.

It's the way of the organic business model.

  • Every participant can then know what he/she does best.
  • Every participant can then discover how what they do makes a difference for the people or companies they serve.
  • Then, because the organic system strives to compensate based on the actual value delivered, each participant may elect to contribute, and therefore earn, as much, or as little as they desire.
No heavyweight management is required. No supreme controller or almighty decision maker is necessary. No artificial value requirements need be imposed.

It makes sense.

All of the mechanical model "controllers" ought to pay attention to Brian Wesbury, chief economist for First Trust Portfolios, LP. In an editorial published June 11, 2008 in the WSJ. Brian astutely observes:

"In contrast to what some people seem to believe, having the government take over the health-care system is not change. It's just a culmination of previous moves by government. And the areas with the worst problems today are areas that have the most government interference – education, health care and energy."

"The best course of action is to allow a free-market economy to reallocate resources to the place of highest returns. In the midst of all the natural change, the last thing the U.S. economy needs is more government involvement, whether it's called change or not."

Only an Organic Model solves the problems.

In today's hyper-dynamic world, hardening mechanical models in attempt to improve economic conditions will prove no more successful than removing the flexability from the wings of an aircraft. Such practices will, at best, increase the discomfort of the passengers. At worst, it will render the plane unfit to fly.

Rigidity will produce the same negative impact for the economy, or for your business.

Monday, June 2, 2008

The High Value Capital of Business - It's Not What You Think; It's Human Capital

Peter Drucker's comments about business structure and management emphases tickle me. They tickle me because the very statements he makes run absolutely counter to the widely held beliefs of today's "experts." The difference is staggering.

In his 2002 book, Managing in the Next Society, Drucker makes comment about the problem "financial people" have managing business.

"There's an enormous challenge ahead to educate the owners of business, many of whom, as I've noted, are financial people. I once was a securities analyst, so that gives me license to say that it is virtually impossible to make a financial person understand business. I am not being facetious. Financial people don't deal with the issue of balance between often conflicting elements - short versus long term, continuity versus change, improving today versus creating tomorrow. Corporate leaders who wrestle with these issues every day know the amount of struggle involved, but it's difficult for financial people to understand this."

This ought to shake you to your core.

Why all the emphasis on managing by financials?

It happened simply and innocently enough. We began to confuse the financial statements with the business, itself. Human capital is thought to be either non-existent, or of little real value.

For more than 50 years the relative stability of technology and demographics paved the way for repetitive, mechanical hierarchical business models to succeed. They had predictable structure, and outcome based on repetition of mechanical practices, which then yielded predictability in financial results, creating the false association. Good financials were erroneously equated with good business. The two patterned so closely that the difference would be difficult to discern.

Market Hyper-Dynamics Defies Management by Financials

Today's technological landscape is no longer as stable and predictable. The demographics are also nothing like those characteristic of the last 50 years. The entire landscape is in constant and accelerating change. In this new world, it is now necessary to see a business for what it really is, and to recognize that financial statements are merely the report card for how the business is working. That is their only relationship.

A Business is not a Machine, it is more like a life.

A business is a complex web of conversations and social relationships. Out of these comes the continuous ebb and flow of the menagerie of products and services, which are developed, created, communicated, delivered, and serviced by provider companies to their customers. In this hyper-dynamic marketplace, it is far less important what a company thinks they do as much as why, for whom, and for what betterment of the customer and the world itself.

Conversations and relationships are characteristics of a different dynamic than a machine. They are characteristic of people, humans, living things. They are organic in their very nature, and require organic processes and organizations to endure. People are the very soul of business. Human Capital produces the value of all other capital.

I heard the CEO of an energy related firm make this very interesting statement.

"When we consider the human relationships as critical in my enterprise, we have a struggle as our material "assets" as shown on our financials represent $BB, while our people "assets." even as costs represent only $MM. It seems that the larger assets are the most important. We are coming to recognize that the real value of the material "asset" is totally dependent on the performance of the people, and this is leading us to realize that the people "asset" is of greater significance to the company performance, rendering the material asset as valuable, or potentially, value-less."

Which "assets," which "capital," do you value most?

I guarantee, if you think like a financial person, you'll answer incorrectly.

If you think like a traditional business person, you'll risk the same error.

Consider thinking more like Peter Drucker. Then you can begin to place more of your energy and investment into the things that produce your greatest ROI. These, of course, are your people, your Human Capital, and if you're like most of today's managers, you are well under equipped to do much to make improvements.

It is time to get some help for your organization. I wouldn't wait. I might even call a PEO.

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Thursday, May 29, 2008

Ric Campo Talks About People, Profitability, and Corporate Culture

I just left a very interesting forum, sponsored by executive recruiting firm, Austin Allen at the River Oaks Country Club in Houston.

Ric Campo, a founding partner of Camden Living, gave a powerful and informative presentation. His comments were filled with the very precepts Camden followed to become a Fortune 100 Best Companies to Work For award winner in 2008, and, one of the finest multi-family real estate development and operation companies in America.

I took copious notes. Ric was singing my song.

Ric's management principles are not the common practice in today's world. Read and see why they should be.

Just to highlight a few of his salient points:

  • Camden has well defined, well communicated missions and values. These do not change with market conditions.
  • Camden believes that their front line employees are the most significant contributors to the company's success.
  • The Company's value isn't derived from a focus on their material assets. Ric said, "It's not about assets, it's about people. Our people are our assets."
  • Camden strives to hire the best and the brightest. Then, the company strives to give them responsibility and authority to deliver Camden's mission.
  • Camden recognizes success based on the creation of an increasing number of high-quality, long-lasting jobs. This is representative of their belief that people are their greatest asset.
  • Camden is very concerned and intentional in maintaining and developing their outstanding corporate culture.
  • In the Fortune Employee surveys, Camden had 92% of their workforce saying that Camden was truly a great place to work. The average among the Fortune top 100 was 89%.
  • Camden is a stickler for "best practices" in handling people. (This is why more companies really need to engage the services of a PEO.)

That might work for some companies, but not when things are tight, or tough.

Some might argue that this is all well and good for some high margin, fluff company. Don't kid yourself. Camden's business, in today's market, is anything but that. They must thrive in a tough, highly competitive, asset intense business. Camden's profitability challenges are as big as they come.

Employee Practices Turn-Around an Acquisition

I particularly enjoyed the story Ric told about one of his mergers. Camden had acquired a fairly large company with an east coast presence. The acquisition had everything it needed on paper to be functioning well, yet, at the point of the acquisition, was not doing so. They even verbally ascribed to the same management and cultural philosophies that worked so well with Camden.

However, on closer look, their talk didn't match their walk. The reason for poor performance could be tied to this divergence, a response to some very difficult, but temporary market conditions. It turns out that the company had frozen salaries, cut bonuses, and increased the employee contributions to their medical plan. Meanwhile, they hadn't cut the executive compensation.

Ric said that these actions upset the affected folks, which, in turn, affected their ability to perform. Needless to say, Camden corrected the situation, in accordance with their mission, and the situation righted itself quickly.

Happy People: Successful Enterprise

Camden demonstrates the true, but rarely followed axiom: The happier the people, the more engaged they will be, the more profitable the enterprise.

This validates the well researched message of Richard Hadden and Bill Catlette who wrote Contented Cows Give Better Milk, and the sequel, Contented Cows Moove Faster. Companies with well placed, well rewarded, well aligned, happy employees, are able to do more, make more money and have fewer problems.

It's kind of funny that most managers still can't see it.

They will, though. They'll need to to survive.

Thursday, May 15, 2008

You Can't Stop the World, And You Can't Just Get Off, Either

Everything is changing. Not a new phenomenon, but an accelerating one.

The rate of change is so great, that more than 50% of US business execs are finally confessing that they are struggling with its pace. And, let's face it, even the rate of change is increasing. I call it Hyper-Dynamics.

It effects everything in our lives, and our companies, much of which management tries to ignore.

Consider some changes we business owners tend to try to ignore.

  • Employee Ability and Aspiration: What an employee once wanted to do for you, he no longer wants to do. He may have matured in his current role, and desires a new challenge. She may now have young children at home, and no longer wants to travel. Children may have "left the nest" and she now wants to travel. The individuals which hold the IP in our enterprises are changing just as quickly as is everything else, but we have no systematic way to deal with these factors, and are inept at adjusting our roles and processes to take advantage of the opportunities these changes afford. Instead, we underutilize the people we have, and we just let then go when are mechanical models no longer require their service in the box we have externally defined.

  • Markets: The entire market has the potential of the international corporation. What was once a regionally valued offering may now be available from a remote producer in China. Outsourcing and off-shoring can render our offerings obsolete. When faced with these challenges, we make the false assumption that we just need to work harder at what has always worked before. We push our sales people to make more calls. We push our service people to work harder. We push our management to work longer.

  • Costs: Energy, healthcare, taxation, insurance, natural resources, and people costs are rising at unprecedented rates. The forces that are pushing them are not even within our control. But we believe that we must make their containment a significant part of our strategic management initiatives. We spend a dollar to save a dime. We focus on financial statements, correcting them, as if they were the business itself.

  • Product value: Whatever I can produce today will be more efficiently produced in the future. Shelf life of ideas is shorter than ever. Windows of profitable opportunity are smaller than ever. But we still function as if we can develop something, sell it profitably, and rest, as though we have arrived at something that will last. We resent the copy-cat, or the competitor that says he does exactly what we do, but at a better price. We gripe about the imitator from the 3rd world who unjustly sells to our customers.

There are many, many more, but these few provide enough to exhaust many the mechanically minded manager.

Our refusal to accept hyper-dynamics will, simply, lead us into disaster. Short term solutions will merely exacerbate our problems. Self delusion just guarantee the inevitable.

My solution? REALLY embrace change. I know it sounds trite, but the mere statement of the words does not prove the reality behind them. I mean embrace, welcome, anticipate, expect, and adapt.

With this, you'll need to grasp the concept of absolutum obsoletum. Whatever we think works today is becoming absolutely obsolete . . . and sooner than I might think.

The solution comes with the change from a mechanical, change resistant organization into an organic, change adapting one. Change from the organization that orchestrates change to one that is able to flow with the change. These are entirely different approaches.

  • Instead of telling your customers what you do, and expecting them to buy, learn to discover what they want and need that you can offer.

  • Instead of determining what your company should be doing in antiseptic board rooms, let the front line employees tell you what their encounters with the real world are telling them.

  • Instead of defining jobs for your employees, telling them what you want them to do, discover what they would do for you and your customers, if they could.

  • Instead of losing sleep and fighting against rising costs, use your people's creative and innovative energies to identify your own company innefficiencies and redundancies.

  • Instead of thinking you have the totality of responsibility or all the answers, free your people to create entirely new, high value offerings for your current customers, and for customers not yet reached.

Besides, you and I already know that the greatest opportunities for excitement, value and profitability exist, not in the middle of the pack, but around the edges, where risk is sometimes the greatest. The rate of change means that yesterday's performance is not the end. Everyday comes with new, high value opportunity. It's up to you to find them, but you need to be looking, hoping and expecting.

And, best of all, you don't need to go it alone. Get your people in the act. Teach them that you value their looking, hoping and expecting. Then, don't ignore what they'll show you.

You might as well make a lot of money, too.

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It's Still True Today: HR People are from Venus, and Business People are from Mars

Keith Hammonds posted an article on Fast Company titled, "Why I Hate HR." It describes conditions which are typical of the attitudes and experience of companies when considering the involvement of their HR processes as profitability drivers. It is an old article, but well worth re-reading as the problems he communicates aren't really any better handled since he wrote it nearly 3 years ago.

One of the best means of immediately impacting the performance of employees (and with it, the increasing the profitability for the employer) is the performance review. As I have illustrated in a post comparing the sports world with the corporate world, effective performance review processes are tremendously beneficial to employees and companies alike. Yet they continue to be mishandled and misunderstood, therefore, ineffective.

Hammonds asks the question that is typical of management's attitude about them:

"Why are annual performance appraisals so time-consuming -- and so routinely useless?"

The answer is simple. Management doesn't really know what they are, or, consequently, how to use them.

Management doesn't understand what the sporting world does.

  • Management isn't clear in communicating objectives.

  • Employees don't know how their work impacts the company.

  • As a result, nobody knows how to tell exactly how performance aligns with either.

  • It naturally follows that there would be no resource to improve performance, because no one knows exactly what to improve.

I know how to fix it. So do many others. But management doesn't seem to care.

Why not?

It's the age old, nagging problem. The HR teams don't know how to connect with the business teams. The business teams don't know how to connect with the HR teams. And, this connection is critical to the success of both. HR is irrelevant without the ability to connect to business.

For 20 years, I have researched this problem. In that research I have discovered that most of the thinking about these issues comes primarily from the ivory towers of think tanks and universities. Their revelations may be true, and their conclusions accurate, but the information is too generalized and difficult to apply. To be of much use to most companies, someone needs to connect these discoveries to the streets, where the rubber meets the road.

I will do that with my new book, The Squaredime Letters, to be released this summer. Squaredime will provide real guidance for business and HR groups alike. It is a must read for both HR professionals and management alike.

The good news is that when the HR/Business connection is finally made, productivity and profitability will be substantially improved for everyone involved.

You know what that means? More earnings for all.

Monday, May 12, 2008

A Strengths Based Approach Makes the Job Search Easy, and A Lot More Fun

I’ve been counseling college students to forget what they think they know about “getting a job” to pursue a “strengths based” effort to become involved with an employer where they can maximize their entry value in whatever enterprise that may be fortunate enough to hire them.

It’s a simple and effective process.

Let's say you want a job.

Begin with a change in perspective. You are really not simply looking for a job, as if you were taking something from someone, but, instead, you are looking for an opportunity to serve someone, as if you are actually giving something valuable.

To do this confidently, you must absolutely know how you naturally work best. This knowledge is what Marcus Buckingham calls a talent, which is the foundation for a strength. Once you can identify your real and natural strengths, you can approach employment in a new way. What you'll learn isn’t what job you should do, as is customary for career counseling services, but how you should uniquely approach anything you might choose to do.

It’s a five step process:

  • Understand these strengths as areas of near perfect performance. Learn what results they can almost automatically offer, simply because of who they know they are.

  • Research companies to discover ones with visions and missions that are aligned with the kinds of things they can be passionate about.

  • Take a different approach. When talking with a prospective employer, don’t ask things like, “What positions are you currently looking to fill?” and then try to make the resume look like a fit. Instead, using their knowledge of their strengths, engage a business on the basis of the expected outcomes that their employment will produce for the company. This helps the prospective employer frame the hiring decision. It changes from, “Do I have a position for your?” to “Do I want the outcome you offer?” Managers and business owners are hungry for outcomes, and the average applicant rarely offers any.

  • If the first company declines, ask what other companies in the space are in need of the outcome you deliver.

Experience tells me that this approach leaves a better impression than the typical employment interview. Rather than the employee-centered approach, this one shows a business owner that the primary interest of the applicant is producing a beneficial outcome for the business. The applicant is there to help him. If the offer of a great outcome is declined, consider that it may lack clarity. Revise it.

No business person worth his salt forgets the approach. And, if the outcomes are well presented, few can resist the strong temptation to take advantage of the opportunity you present. After all, should they pass on a great outcome, their competitor might get it. This is a risk too great for many managers to take.

Besides, you don't really just want a job, or do you?

Off-Shoring and Outsourcing: Problems for Mechanical Model Enterprises

I responded to a wonderful article by David Williamson Shaffer on Epistemic Games. The article was titled, The End of the American Century, and is a good description of America's misunderstanding of the changes that have, and are, taking place in the world economy.

My comments, reprinted here, clarify the difference in perspective between "mechanical" and "organic" business models, and how this difference highlights our cultural dislike for outsourcing and off-shoring.

David, this is a well written piece. Thanks for your thoughtfulness, and insight.

Yes, the reality is certain, and it is different from that which most Americans assume to be true. There is a larger economic world out there, and most of it is not American.

I was reading Thomas Freedman’s The World is Flat a while back, and, somewhere in the middle, I became frightfully aware of this fact, and of the reality that most of my associates in business believed otherwise. The world’s business models have already changed, and many of us are ignorant of that reality. It became eminently clear that, as Americans, we are erroneously convinced that our long established, mechanical business models, remain the right and true way, and that we should continue to force our businesses to fit those models. This is our form of insanity.

If we are to survive, we must get with the program.

I appreciate your inclusion of the account of the Dallas attorney, Mark Richardson, who said that, out of ethical obligation, he must do what’s best for his clients, and “that includes saving them money.”

His assessment reflects what I believe to be a misapplication of the economic reality he describes. His ethical responsibility is not to “save his clients money,” rather it is to allocate their resources to produce the greatest value for their investment paid to him. His description of off-shoring to a lawyer in India at $60 per hr instead of using his in-house attorneys at a rate of $395 per hr, or his $225 rate for a junior associate, suggests that his rates are, somehow, too high.

I think this perception is common, and a misunderstanding of the real value proposition to be considered. There is a world of difference, and understanding that difference will illustrate the problem many Americans have with concepts such as outsourcing, or off-shoring.

We have a natural distaste for both. It appears that available talent off-shore will take jobs away from Americans. We can’t possibly remain profitable if we are forced to reduce our fees to compete with these off-shore providers, so we think. And, so we fear. However, we miss the basic economics of the opportunity.

America’s infrastructure is considerably well-developed and expensive to maintain. We are also well-entrenched in it. We can’t, and shouldn’t expect to eliminate it, which would be necessary if we are to attempt to compete in this world economy taking the fear-based approach inherent in our “save money” models. Instead, we need to embrace it, to recognize its value, and then use it to our real advantage in the development and delivery of the products and services it can produce. That infrastructure affords us opportunity unavailable and undeliverable by our “competition” in places, which like India, are as of yet under-developed.

The basic tenant of our capitalist economy is the free exchange of resources to gain other, more valuable resources for the betterment of our lives and our companies. At the core of every financial transaction is the idea that all participants gain value in the transaction. A consumer receives greater value from the transaction than what he spends. The seller receives greater value than what he spends to provide the product or service. Done right, both sides profit.

Take the case of the attorney. The law firm's client chooses to buy legal services that provide a greater value than their associated expense. It is the ethical responsibility of the attorney to do just that. Here is where the decision to off-shore aspects of the transaction comes in. The basic research task described in Shaffer's article is an example of a non-strategic offering. Grunt work in simple terms. Such work may provide some value to the client, but the value of that work should not be understood in the framework of the cost to produce it, but in the value of the impact of the work done. The two are really not related. If attorneys in India can provide the entirety of the value to be received for 25% of the cost of attorneys in America, so be it. The value realized is not diminished at all. If attorneys in India are happy and fulfilled only requiring $60 per hr, an efficiency is created, making it possible for the American attorney to deliver the same value to his client at a reduced cost, first to his firm, and secondly, if he should choose to reduce his fee to deliver that value, to his client.

So, off-shoring actually enables the attorney to increase his value to his client, but that value does not lie in his ability to “save his client money.” Such a limited view diminishes his value to his clients, and violates his ethical responsibilities toward his own firm. Both parties have the ethical responsibility to maximize each other’s value, and earnings. Saving money may occur, but cannot be the foundation for value description. Since there is an opportunity to off-shore, the greatest value can now be realized from better utilization of the American attorneys. They can now apply their creativity to strategic activities with the opportunity to add vastly greater value to their clients, tasks well worth the $300+ per hr that they need to maintain the operation and necessity of the firm.

The distinction between the two perspectives lies in the way we tend to view a pricing model. We tend to choose something from our mechanical, manufacturing business models. We consider cost, add some “fair markup,” and assume the rate to be some sort of value. In reality, there is no cost + fair markup anywhere in the value equation. The value exists only in the mind of the customer, and it is not a cost plus proposition. The cost has no significance to him, only that, all things considered, the purchase costs less than the economic value received. Should the law firm be ethically able to charge $300+ per hr for services it provides? Absolutely. However, and this is the critical distinction, it can only support the fee if the value provided is worth multiples of the fee to the customer.

Only when American companies end their love affair with cost plus pricing and adopt value based fees, will we be able to fully embrace every opportunity to send our less-strategic work overseas, and then become what our well-developed infrastructure requires, that is high value/ high margin enterprises.

Friday, May 9, 2008

Become "Well-content" with Weakness - Maximize Your Strengths

The Bible has some valuable business content, particularly content about maximizing individual and team performance. One particularly useful insight comes the New Testament, from the Book called II Corinthians, Chapter 12 verse 10. Permit me a little leeway in how I interpret Paul's words and apply them to business.

Paul says, in essence, "I am well content with weakness, for when I am weak, I am strong."

Dumb idea? Sounds a little ridiculous, where business is concerned.

O, contraire.

Paul's admission is, in actuality, one of the most important yet neglected truths in our world. Paul has discovered something that most people refuse to acknowledge: People are, for the most part, weak. That is, most people are not qualified by strength, talent or unique ability to do a whole lot of things. I dare say, most things. Paul realized that, if he were accurate in self assessment, he had but a few areas of great strength, of unique talent and powerful ability. In everything else, he was somehow deficient. This is also true for you, and for your employees.

In our world of "universal education," where intelligence is measured purely by academics, we become convinced that "well roundedness" is value, and that the way to achieve the greatest of human potential involves becoming as proficient as possible at all things. And, in light of human pride, the acceptance of weakness without significant effort to eliminate it, is foolish.

The truth rests in an entirely different model.

Marcus Buckingham's work, Now Discover Your Strengths, reveals something about a small group of people who achieve incredible levels of success. Synthesizing millions of interviews with all kinds of individuals, Buckingham determined that the most significant and common feature of each of these "super successful" people was their ability to accept, and embrace their individual strengths and weaknesses, and to live and work without the need, ir interest, to do much to improve their areas of weakness, making every effort to function only in the limitations of their strengths.

I would say that these "super successful" people were "well contented in their weaknesses," knowing that when they are weak, (that is fully informed of where they were weak, and avoiding the pull to work to eliminate the weakness) they are strong.

Ignoring this creates reverse leverage in our efforts to be as productive as we can. Buckingham points out that an effort to improve an area of weakness requires more energy than the resultant gain. A whole lot of effort produces a small improvement. So, working on weakness is a bad investment. I call it "negative leverage."

On the other hand, with regard to a strength, it takes but a small amount of energy to achieve great improvements. This is "positive leverage."

Two Contrasting Perspectives on Growth

One school of thought holds that people can be taught to do most anything, and that the area of greatest potential growth is in an area of weakness.

Another school says that there are but a very few tings that any individual is talented has a strength to do well, and that the area of greatest potential growth is in the area of greatest strength.

Buckingham's research supports the latter position.

What does this mean to the potential productivity of our company and the people who we employ? How could this insight help us to deal with the growing number of distractions and activities which are beginning to paralyze many of our operations?

Simple. It offers a solution. It offers the potential of leverage for every employee in every area of our company. It offers the chance for people to "do less and accomplish more."

Taking a Different Approach

Instead of managing activity and time with the same, mechanical processes you have used for decades, consider another approach. Instead of the linear and sequential organization of tasks, which just grow in number by the day, consider an approach which is not so activity focused, as much as outcome focused. Consider that the activities with the greatest leverage potential shouldn't even be on the same list with those that, done by those without the strength to leverage them, are but negative leverage. (They take more energy to get done than the value they bring.)

Consider these possibilities:
  • Discover the strengths of your people. Everyone needs to know what they, and their co-workers do naturally, with the greatest ease and with the greatest result. Then, you need to help them, whatever they do, to work in accordance with those strengths.
  • Get to know which activities have the greatest impact to bring you the most significant return on the effort invested. Any low impact activity needs to be eliminated, of outsourced to a company where the activity can be leveraged for your organization.
  • Re-align your work so that you and your employees know how their contributions actually impact your profitability, and that of your customers. Then, by properly aligning your compensation and reward strategies, your employees will, naturally, do the things that bring the greatest reward for everyone.
  • Become flexible enough that you don't institutionalize practices and activities in a non-institutional, hyper-dynamic marketplace in which you work. Everything, especially your customer, is in constant change. Adaptability to the world outside is very difficult with institutionalized internal practices.

You don't have to wait until you're overrun and your people are over-worked with low value, low-impact activities before you make any changes. Learn to embrace your strengths, and your weaknesses, letting others do the same.

If your employees could work half as hard, with double the results, you'd reduce the stress of your workplace, reduce your turnover, reduce your management involvement, increase your innovation, and gain the profits that would result.

Today might be a great time to start.

Thursday, May 8, 2008

Performance Expectations - Clear in Sports, Blurred in Business

Performance expectations are clear and mutually understood in the sporting world, but blurred for employees in most businesses.

In the sporting world, each and every player knows his position, his roles, and responsibilities. And, maybe more importantly, each knows how his contributions impact the outcomes of the team.

Every wide receiver knows that he is a wide receiver. The very position is aligned with his athletic strengths. He knows where to line up for a particular play, and where he is to run his route. He knows blocking assignments and decoys. He knows whether he is primary on a given play in a given situation. When a pass comes his way, he knows what he is to do. Once he catches it, he applies different skills to evade would be tacklers on his way toward a goal known by all the other players on the field. A good player is able to improvise in accordance where necessary, in accordance with the common goal.

In the business world, only a few employees actually know their position, their roles, or their responsibilities. More importantly, only a very few actually each know how their contributions impact the outcomes of the company.

In the business world, employees often know little more about their job than their job title, and some generally related activities. That may be it. And, sadly, that job may not utilize the best strengths and attributes of the employee at all. Unbelievable as it sounds, this data is supported by employee surveys again and again.

Employee surveys indicate that only 40% know the primary goals and missions of the company. Only 20% know how their job contributes to those goals. Only 20% even care. Only 20% know how their regular activities impact profitability. They come to work to do their job. When it comes to improvising, or innovating, since they don't really know what matters most, they choose not to. And, in a crunch, employees don't know how to choose the most productive activity in unique situations.

Businesses Lack Strong Employee Alignment - Expectation Need Clarity

Imagine not knowing the real end game. Imagine not knowing which end zone, or which basket is yours. Imagine not knowing what is a win, or what is a loss. It would spell failure in sports. In business, however, it only spells mediocrity, lack of engagement and contribution, resulting in less-than-optimal performance. Management must continually step in, micro-manage, sometimes applying pressure, most of which is misunderstood by the employees involved.

Poor alignment is like having a team where many of the players, somehow, without knowing it, undermine your ability to achieve. They are effectively working to benefit the opposition.

Businesses Struggle to Get the Best From Their Players

Ever wonder why some employees seem to lose interest over time? It's the same reason that they aren't continually increasing their contributions over time. People love to work for great outcomes. Gen X and Gen Y employees aren' t terribly interested in trading their time for a paycheck. They want to be working with other engaged people to accomplish great things. They want to win. If an enterprise has no greater goal than "maximizing shareholder value" or "making money," you can be sure your best people will just bide their time until something better comes along.

Do You Have a Vision, a Purpose and a Mission?

This is the most undervalued, and misunderstood essential when it comes to recruiting the best, and aligning them achieve great goals for your enterprise. It provides the answer to an often unasked question: Why should the very best people want to be a part of our company?

I am amazed how few executives I work with have clearly determined why their company exists in the first place. I mean, why, really. Why this industry? Why now? Why here? What about our customers? What impact does our company have on them? Are we here to make any difference? If so, what difference is that?

If your company should go out of business, will it be missed? If you don't know how you'll be missed, or who will really miss you, I recommend getting alone with some of your key stakeholders, or your employees and getting the answer. If you don't know, I guarantee your people don't know. Even if you do, it's probably a good bet that most of your people don't. If they don't, they don't know why they work for you, making them easy prey for your competitor. (You do realize that over 60% of employees are just biding their time working with you, waiting for a better opportunity to come along before they jump ship.)

What Should you do? Get clear about some things:

- Know what it means to win.

- Know your purpose. Develop a clear vision and mission for your enterprise.

- Communicate. Inspire your people. Engage them in the common call.

You'll begin to attract more winners, people who will know why they want to work with you. They'll know what it means to win, and how their involvement affects the outcome. Then, they'll make greater and greater contributions, ones that move you closer to the goal. Hindrances will decrease. Your customer and competition will take notice of you. You'll make a mark.

You'll start to stack up more wins. And that means, in the end, you'll make a lot more money.