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.

• Customer needs: What a customer wants from you today is different from what he wanted yesterday, and what he'll want in the future. They are seemingly more fickle than ever. 80% of customers who leave would say that they were satisfied, or very satisfied with your service. But they left you, hoping to find a better value from another provider. Our offerings have been devised and "perfected" from our own perspectives. Our internal systems are mechanically created to provide what we think we should provide. Adapting to customer's felt needs takes a back seat to our beliefs about the way things are. "That's not our policy." "We can't do that." We justify our position: "We've never had to do that before. We don't need to start now."

• 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.

Business Lessons From Sports: Performance Management is Key to Winning

Businesses and athletic programs are similar in that successful programs win.

Winning, however you define it, is the result of proper execution - players doing what they're supposed to do, when they're supposed to do it. Proper execution is dependent on player performance – in the game.

So, teams and companies that best manage player or employee performance win. They have the right people, in the right jobs, executing the right way.

In sports, results are reported in the standings. In business, results are reported as profits.

It just makes sense.

I must make a worthy observation. Business performance management practices in business are deficient and under-developed compared to those common to sports . . . and it is costing us millions in potential profits.

Business should take a lesson. It will revolutionize results.

I want to address just four glaring differences between the two models. Seeing these will help us, as executives, make some simple but important adjustments in our own practices which will really improve our results. The deficiencies in our business practices should then become clear

• Goals and performance expectations need clear definition. These are exact and mutually understood in the sporting world, but blurred for employees in most businesses. In sports, everyone knows what winning means, and every player knows how their job contributes to that goal. That is not characteristic of the teams involved in our businesses.

• Monitoring, encouragement and correction must be immediate, relevant, and continuous. Player performance is monitored and corrected regularly, even immediately, in sports, but is handled only intermittently, monthly, quarterly or even annually for employees in business. Athletes receive immediate feedback and coaching. Good habits are reinforced, and bad habits are broken as soon as possible. Employees may not even know how they are doing.

• Resources for improvement must be readily available. Player performance correction and coaching for improvement is immediately available for the athlete, but may not even exist for employees. In the sporting world, coaches, trainers and specialists abound. Specific enhancements are developed. In business, correction comes without specific help to develop performance.

• Regular training and skill development must be central to operations. Ongoing, regular training is commonplace and essential for any and all highly skilled athletes, while businesses falsely assume that well recruited employees don’t need ongoing training. They should already know what to do, and how to do it. Practice is expected for athletes. Employees rarely practice.

Recognizing and correcting these differences and correcting your processes will mean an increase in your employee's performance, and with it, your company's profitability.

Modeling company performance management practices after those of a sports franchise will improve you revenues, reduce your costs, and create competitive advantages. It will take pressure off your management, as your staff adapts and innovates in ways that will create value for your company and your customers.

Don't know where to start? You're not alone. Consider calling a professional, like a PEO. A good PEO should have a full coaching staff, a veritable well-equipped gym, in fact, everything you need so you won't have to hire a bunch of people to make sure you cover your bases. I work a lot with one particular PEO, Administaff. I know, firsthand, they can help you pull this off very easily.

In the words of FedEx’s Fred Smith: You’ll make more money, and have fewer problems.

I think that’s worth a lot.

You'll Need a Whole new Mind to Survive: The Backbone of the Innovative Company - People

In case you ever wonder how you can help your company be more profitable, or innovative . . .

In case you fear that you may not have a long term competitive advantage in your industry . . .

In case you wonder if you'll ever really fit in to today's workforce . . .

Here is a groundbreaking book which well describes the powerful, changing forces at work in our world, changes that, when fully accepted and embraced, will increase business profitability exponentially. The Book is titled, A Whole New Mind: Why Right-Brainers Will Rule the Future by Daniel Pink.

Pink writes in his introduction:

"The last few decades have belonged to a certain kind of person with a certain kind of mind – computer programmers who could crank code, lawyers who could craft contracts, MBAs who could crunch numbers. But the keys to the kingdom are changing hands. The future belongs to a very different kind of person with a very different kind of mind – creators and empathizers, pattern recognizers and meaning makers. These people – artists, inventors, designers, storytellers, caregivers, consoler, big-picture thinkers – will now reap society’s richest rewards and share its greatest joys.

This book describes a seismic – though as yet undetected – shift now underway in much of the advanced world. We are moving from an economy and a society built on the logical, linear, computer-like capabilities of the Information Age to an economy and a society built on the inventive, empathetic, big-picture capabilities of what’s rising in its place – the Conceptual Age.”

Value, Innovation, Creativity, Employability and Profitability

Anyone looking for the clearest picture into value creation in the coming century should read this. Understanding this great shift will bridge the generation gaps with Gen X, Gen Y and Boomer employees, making your company organically innovative, giving you sustained competitive advantage in your marketplace.

If you are a potentially disillusioned member of GenX or GenY and you wonder how you fit in, you will love what Pink says. You also should be familiar with Ryan Dorsey, and his bestseller, My Reality Check Bounced.

Did I mention that this is a key to sustained higher profitability?

My practical study into the People-Profit relationship parallels much of what Pink and Dorsey describe sociologically. There is a huge deficit of profitability missed by most every company, simply because current mechanical management practices prevent them from realizing the tremendous creativity and innovation contained in their own, current workforce. [Read again: Current practices actually prevent companies from making as much as they can.]

Don't wait until you get much further behind before you begin to convert from the mechanical to the organic business. You might lose your best resources while you wait.

As always, early adopters will reap the greatest benefit.

Did I mention profit?

When Numbers Don't Tell the Truth - But You Pretend They Do

I wonder at the logic of some executive decisions.

• Q: Why would otherwise intelligent executives spend a dollar to save a dime?

• A: Because they don't realize that they are.

They've been doing it ever since they learned to manage by financials.

If you consider what happens when business people start to think like financial people, it will make sense why. Financial people manage by manipulating line items on financial statements.

Here's the logic. Decrease an entry = reduce a cost.

All is proper. All is true. All is right. Manage by the numbers, and numbers don't lie - that is, unless you won't honestly look at all the numbers.

It's the age old, mythical discussion of "hard" costs vs. "soft" costs. And, this thinking is costing you money.

• Lie: Hard costs are real costs. Soft costs aren't.

• Truth: If money goes out, it is real.

There are no such thing as "soft" costs, only costs that cannot be connected to invoices, with corresponding line items on financial statements. As I said, if money goes out, there is a real, "hard" cost, even if you have trouble accounting for it.

The Health Insurance "Shop and Change" Model

Here's the real case of a 35 person company I worked with recently. It's the same strategy followed by countless companies, every day, all across the fruited plain.

The owner/operator is a prosperous fellow in his mid 40s. He manages by financials. He didn't like the 12% increase in his health insurance premium he was given upon renewal. It would increase a line item on his P & L. It would reduce his profits.

So, in accordance with his "mechanical" model, he had already fixed things. He had already followed the very same tried and true method he always used to handle any cost increases he faced. He shopped. He needed and got a better number for his financials.

Good strategy? Appropriate accounting? Not really.

My friend needed a lesson in real math, a lesson in real expenses, a lesson in accurately assessing the cost of anything. You see, his methodology makes financial sense unless the change causes the company to "spend more money" making the change than the change nets.

In his case, as in many others, it did. He just hadn't really looked.

Where Else do Costs Exist?

Here is the typical dynamic at work for most companies in their effort to manage the cost for employee health benefits. You'll recognize it. It is part of a cycle that goes something like this:

• Set expectations based on rumors, news reports, comments by insurance people calling, wanting to “give you a quote”.
• Become anxious about an approaching renewal date.
• Get your renewal. It is usually "too high."
• Listen to explanations, justifications, and excuses from your agent.
• Go out for other quotes.
• Shop plans, and plans, and more plans.
• Set up spreadsheets.
• Compare apples to apples. (Which cannot be done.)
• Make the difficult decision to change.
• Hold employee transition meetings.
• Answer many questions. What? Why? Oh my?
• Adjust, breath a sigh of relief if nobody quits, and pretend that you’ve done something good, something right, something necessary.
• Begin the entire process all over again in 9 months.

You know the drill. So did my friend. He'd done it countless times before.

The problem was that he wasn't accounting for all his real costs. He never accounted for:

• Cost of the distraction, the loss of his executive focus.
• Cost of meetings with brokers and subordinates. (He held 6 over the course of 2 months. that is at least $1500 for a leader making $150k/year.)
• Cost of non strategic use of his mental bandwidth. (Profitable projects needed his brain.)
• Cost of subordinates time building projection models. (At 6 hours, at least $300, not counting other things that weren't done.)
• Cost of the 120 minutes each member of the staff spent in direct transition meetings. (That single expense was $5500 for 35 employees averaging $45k/year.)
• Cost for the breakdown and rebuilding of employee confidence that accompanies any change to benefits. (Employees talk among themselves and spend countless hours doing their own comparisons while at work. Let's be conservative and give each employee only 1/2 hour of wasted time. Cost: $1500.)

So, this corporate leader cost his company a minimum of $8800 to make the transition.

What Did it Get Him?

For all of his efforts, he was able to moderate the 12% increase ($15k) to 6% ($7.5k). He reduced a line item on his financial statements. He could report this "success" to the board.

However, the real bottom line reflected something completely different.

When you spend $8800 to save $7500, no matter how you do the math, you lose $1300. And that's only counting the actual labor dollars he could actually identify. Guaranteed, the losses are far greater if he were to account or any loss of attention, or loyalty, or goodwill, or whatever else he had the guts to consider.

Upon closer discovery, with the courage to be honest, my friend discovered that his real costs surpassed the financial savings he anticipated, and reported, in the change. – This means he, and his company, lost money making the change. He spent a dollar to save a dime.

Numbers really don't lie. They just don't have a chance to be accurate when the real variables aren't included in the equation.

Get smart. Count the real cost of your "cost saving" measures. Otherwise, you won't really be saving any money at all.

You might even save your way right into bankruptcy.

Companies Must Discover Corporate Culture as the Foundation to Effective Marketing: Marketing and Culture are Inseparable

Marketing: Communication of your ever increasing value and impact to your clients, prospects and your marketplace over time.

Corporate Culture: In a nutshell, a company’s culture is identified by all communications that take place inside and outside the company. They include communications between the management, the employees and all their friends and family, spreading to customers, suppliers and associates of both. Any and all communication is duplicated and repeated many times by the people involved. The sum total of all communications defines corporate culture.

Unintentional Corporate Culture Diminishes the Value of Marketing

Culture as described, is often in conflict with the expensive, carefully crafted and communicated marketing messages. Because of this, the marketing message loses much of its power and credibility. This is why many of your perfect prospects don’t buy from you.

Communication is Usually Inconsistent

In the typical scenario, employees say certain kinds things to their bosses. They say different kinds of things to peers, still different things to subordinates, and different, things to clients. They say still other, different, things to family members and friends. This inconsistent communication creates a veritable cacophony of mixed and varied messages producing confusion in the marketplace, no matter how carefully the “formal” marketing messages are created. The “informal” messages are continuously and naturally transmitted through “portals” of interaction, so many, in fact, that they actually overtake the intentional, “canned” corporate message.

As a result, it doesn’t matter what your brochure says. The culture is already communicating some louder and clearer message within the marketplace. The marketing messages are then in conflict with the “cultural messages” already in play.

An Intentionally Crafted Culture is More Important than Good PR.

Culture "happens" whether you're intentional about it or not. Most companies just "let it happen."

You'd never handle your marketing unintentionally. In fact, you’ll invest a lot of money designing perfect marketing strategies. You might even have no problem paying professionals to assist. But you’d never even consider making even a small investment crafting your culture.

“Soft,” you say. “Not too smart,” I say.

This one single practice will absolutely prohibit your company or your ideas from expanding virally. Too many communications are in virtual conflict. The marketplace’s thinking about your company isn’t consistent and clear enough for natural customers to flow to you.

You can only imagine how well the cultural messages must be honed so that something distributed on YouTube, produced by some randomly involved “man-on-the-street” will present exactly the same message that in an ad costing the company thousands.

Get Better Results, Year After Year, Without Always Working Harder and Harder
Your company’s communication via culture must become clearer, tighter, and more intentionally directed, all the time. This one thing will grow a your revenues, customer loyalty and equity far faster than hiring more salespeople, offering more training, doing more marketing, or firing the CEO and hiring a new one.

It even makes sense to bring in expert help, a PEO, or a total service enterprise like Insperity, or a "Best Places to Work" consultant to get to work on your communications, that is, your corporate culture.

The good news is that if you make the investment to intentionally craft your internal communications, that is your corporate culture, you’ll begin to realize ever increasing benefits automatically . . . organically.

The Most Neglected Secret of Cost Reduction: Duh, It's Your People

Companies always ask me to help them reduce their costs. And I am almost always successful.

The common roadblocks to success may surprise you.

They are really asking the wrong question.

What management thinks it is asking is a different question than the one that will bring the outcome they want. They ask the question from the limited perspective of a financial person, rather than that of a business person. From that limited perspective, they are asking me to reduce a line item on their financial statements, and that is almost always either impossible, or of much less significance than what is really possible.

Limits of a "Financial" Perspective

The financial perspective asks something like, "Can you reduce my health insurance cost?" Or, "Can you cut my Workers Comp cost?" They are thinking that they can get the best outcome by simply "beating a vendor down," as they have historically done in the "mechanical" business model they work with.

However, check the costs associated with health insurance, other insurances, energy, taxation and people (line items on financial statements). These business costs are all rising faster than at any time in our history. The cost reduction gains available, if at all, are tiny, especially when compared to the gains available by making changes in systems and performance, as characterize an "organic" business model.

The right question involves going "Organic."

Here is a great example.

I recently worked with a fairly substantial ISP. They had an industry standard turnover rate a little shy of 50%. They used industry standard protocols for supervision and hiring. They felt that their healthcare costs could be reduced. That reduction saved them 15% in that one area, and they thought that was good. With their 150 employees, they could book $70,000 of savings.

They would have missed the greater opportunity.

With $5.5MM in annual payroll, the health insurance savings only amounted to a reduction of 1.17% off their labor costs. It's a mere tweak.

However, I ask a different question related to cost savings. Asked about the "organic" and intangible things at work in the company, I looked for systems inefficiencies and redundancies. I looked for things that might be done differently to achieve substantially better results. I looked at people practices. In this case, I looked at their recruiting and hiring and supervisory practices.

The way this company worked, with the high, although acceptable turnover, their supervisors were capable of supervising 12 people. They spent an inordinate amount of time on recruiting and training their people. By outsourcing this single piece, they could change the capacity of the staff they could supervise. We moved it from 12 to 16. (a mere 33% increase in supervisory efficiency.) And, the improvement in hiring practices decreased their turnover by more than 1/3 within 6 months, which improved employee production and customer service.

The resultant cost savings exceeded 9% on total their labor cost. That was nearly $520K. Without even accounting for the "soft" benefits associated with enhanced performance, or improved customer retention, this "organic' approach netted them a whole lot more profit than they could have ever gained following their "mechanical" and financial approach.

Why don't more companies look past the limitations of their cost reduction models? The answer is simple. Most companies are looking at pure "financial" solutions. These fit their "mechanical" models, and seem appropriate as they are acceptable to the "boards" to which they report. The "organic" approach means that they focus on "non-financial" areas, (people, leadership, systems, culture) areas that are seen as "soft" and therefore, less valuable.

The truth is different; the proof is in the pudding. The areas of greatest impact lie in the "soft" stuff, the "intangible" stuff.

In the inimitable, simple language of James Carville, "It's your people, stupid."