The New Information Direction: Push Over Pull

Ever since we started using computers in virtually every business, we’ve been putting data into them. Unfortunately, the issue has been getting information back out.

In the middle 1980’s I ran a manufacturing company together with a couple of Australians. They thought my insistence on putting our records into a computer amusing, since PCs had not yet made many inroads in Oz.

We ran MAS 90, on an “99% IBM compatible” white box. It did scheduling, inventory control and shipping/receiving. Customer tracking? No. Purchasing? No. A friend wrote a macro for Excel that could pull out the usage and inventory to suggest order quantities. We’d watch in amazement as she’d hit “enter” and the monochrome screen cycled through 25 or 30 screens as it did its calculations. Now THAT was advanced!

One day I came into the office and, to my horror, our data-entry guy had the computer apart on his desk. I demanded to know what exactly it was he was doing. He explained that he was installing an additional 30MB hard drive. I exclaimed “Are you nuts? It already has a 20MB hard drive. That will last us forever!”

Now that machine couldn’t handle the Candy Crush game on my phone; but despite the awesome power at our fingertips, the original problem hasn’t gone away.

locked computerWe pour millions of information bits into our systems. The databases have every transaction, every customer, every incoming shipment, and every due date. So why is it so hard to find out what our ancient homo sapiens brains tell us we need to know?

I want to see if any customer’s ordering pattern has changed. Did the special we ran on widgets last week impact sales positively or negatively for related lines? How much of that new salesman’s business is growth in existing accounts? Does a customer’s breadth of purchases differ for those who are opening our e-newsletter?

Until very recently, the answer for small business owners has been “Wouldn’t you like to know?” (I can’t speak for big corporations that run multi-million dollar software. Maybe they’ve had this all along.) The software vendors proudly point to their report writer. “You can get anything out with that.”

But few small businesses have the time or energy to learn another programming skill, and report writing software isn’t easy. So we look longingly at the box that contains everything we need to know, and then still rely on instinct and experience to make decisions.

If your business is large enough to have someone that specializes in Crystal Reports or another data mining software, that person is likely months behind on requests to pull information from the data.

We are finally seeing software that searches for comparative information on its own. Are you ready for a program that sends you a message like “You made a change in the freight charge policy last month. Would you like to see the impact on average order size and profitability?”

It’s coming. I’m seeing examples of “push” information in multiple industries. Most of us will just think of it as a cool new feature on the next upgrade, or the one after that. In reality, it’s going to completely change the meaning of managing by the numbers.

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Help Your Friends, Not Your Competitors’

I hear it all too often. “A customer just called us for a quote. They have always done business with our competitor. We’re going to give them our best deal, and see if we can take their business.”

Before you do anything, the first thing to ask is why they are calling you. Many reasons won’t indicate that your best price (and lowest margin) are called for.

Perhaps your competitor is out of stock or at capacity, in which case all you’ve done is pass up an opportunity to maximize the value of a one-time sale. If their vendor relationship is strong, they are unlikely to leave merely for price, at least not without asking their currently supplier to match it.

Are they having a disagreement with your competitor? The appropriate response may lie with delivery times, shipping costs or service levels, not price.

Has the customer been cut off for slow or non-payment? In that case, you are merely relieving your competitor of a problem account.

Did the competitor just initiate a price increase because costs are going up? If so, would special pricing lock you into less-than acceptable margins, or can you sustain it over the life of the relationship?

Is the competitor having other problems? Did a top salesperson quit? Has the company changed hands? The call may have nothing to do with you.

customer loyaltyFinally, what would your customers, the loyal ones who do business primarily with you, think of this special pricing? Nothing stays secret forever. Are you risking currently profitable business in the chase for more? What will your salespeople think about giving out a better deal than their most dependable accounts get? Are you risking general price erosion?

It’s in the nature of every entrepreneur to chase the new and challenging. The psychological thrill of winning, taking away someone else’s business, is very tempting.

Your business has been built on your friends (loyal customers), not the friends of your competitors. We all know that retaining a good customer is more profitable than hunting for new business.

Ask the prospect why he or she is calling you. The answer may surprise you. If they won’t answer, dig a little deeper before you pull the trigger on discounts.

(Thanks for this one, Harry.)

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Is Two Weeks Fair Notice?

I formerly employed an assistant who held a Masters Degree in Human Resources. On occasion she’d say “I love working here. I’ll never quit.”

Of course, as a good employer I felt an urge to reply with equal commitment, but I couldn’t. I’d say “You realize that you can say that every day for the next 1,000 days, and then just never show up to work again. There is no penalty. But if even once I reply ‘And I’ll never fire you,’ I’ve offered a verbal contract and can be sued if I change my mind.”

We’d both laugh, because we knew it was true. The continuing employment relationship is completely stacked in the workers’ favor. Any verbal or written promise of continuing employment creates an obligation on the part of the employer. The company must document any change in those conditions.

Under the Worker Adjustment and Retraining (WARN) act an employer of more than 100 people must give at least 60 days notice of a layoff. I’ve known several companies of that size who experienced a sudden downturn in business. Faced with a choice between compliance and having the company go under, they took their chances with ignoring the law.

quitYet your most critical employee, your second in command, top salesperson, or an engineer in the middle of a large and complicated project, can just call one day and say they’ve gone to work for a competitor. The law says they have that right unless contractually prohibited.

The verbal or written promise is one reason why many small companies avoid employment agreements. That’s like entering into any other long-term business agreement on a handshake. It may feel like an expression of trust, but a contract makes sure that both parties understand what is expected.

The employee should commit to following company policies, appropriate use of social media (you can’t dictate that in your handbook, but they can agree to it in exchange for employment), to hold proprietary company information confidential, give appropriate notice of voluntary termination, and non-solicitation of other employees after they leave.

Appropriate notice can be spelled out as different lengths of time for different levels of responsibility.

In return the employer promises to follow written policies for discipline and performance review, and give appropriate notice of termination except for cause, with pay in lieu of notice if such arises.

Let’s face it, most employers who avoid employment agreements do so because they don’t want to hold up their end. Their handbook is either nonexistent or a dusty tome that people sign off without reading. They conduct employee evaluations rarely or not at all. They don’t want to be obligated to pay anything at termination merely because they’ve failed to sufficiently document the reasons.

Our economy is based on over 70% services. In a service business, employees are almost invariably the number one expense. You can either look around at your staff every day and know that they may all be gone tomorrow, or you can treat their employment for what it is, a critical component of your business.

By the way, the assistant eventually left (everyone does), but she did so with appropriate notice, and we are still friends.

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Posted in Entrepreneurship, Incentives, Leadership, Managing Employees | Tagged , , , , , , , , , , , , , | 5 Comments

5 Responses to Is Two Weeks Fair Notice?

  1. David Basri says:

    The article has a lot of prudent advice. However, if you added up the total number of times employees have lost jobs without fair notice or reason, and the number of times employers have had employees leave without fair notice or reason, it is not clear that employers would end up with the short end of that stick. The truth is that without mutual respect either party may treat the other poorly. It is because of mutual respect that you and your past employee parted on good terms. When employment is mutually beneficial and mutually satisfying, it will end appropriately even when the termination is inconvenient for one or the other.

  2. Mike Wright says:

    It is always important to outline in advance how a business relationship will end; Rather it is an employee, vendor or partner.

  3. Shouldn’t it be a two-way street?

  4. Greg says:

    The laws today that protect employees in these situations are fair. Companies need to understand that employee loyalty (or lack of) is a product of their own making. When an employee puts their notice in, they’ve been ready to leave for awhile. You protect your investment in employees by making sure the investment continues to work for both parties. When it no longer does, you’re welcome to part ways if it’s for the right reasons.

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Extreme Democracy

Last week the British government announced that it was naming their new scientific research ship the RSS Sir David Attenborough, acting counter to the  people’s selection of “Boaty McBoatface,” despite that name being an overwhelming 3:1 favorite over the next closest choice.

Last summer the Parisian government took down the website for choosing the Eiffel Tower’s next paint job when it became obvious that pink was the runaway winner.

Who decided that letting the people cast binding votes on important issues was a good idea? Would any sane business owner run his or her company that way?

We misuse the term democracy to mean any type of government where the people have regular input into their representation. That’s wrong. A monarchy is rule by one (mono). An oligarchy is rule by a few. A theocracy is rule by religion. A democracy is rule by the majority. In any given US voting group, 49.99% of the voters have little or no say if they lose.

Our pledge of Allegiance says “…and to the republic for which it stands.” The Founding Fathers never anticipated a two-party oligopoly on government. They thought there would be multiple different interests represented in the legislature. Voting rights were initially left to the states, all of which required ownership of property, a stake in the system, to vote. (Contrary to popular belief, a number of states permitted women and people of color to vote, as long as they owned property.)

your vote countsA recent video by two female sportscaster details the unforgivable email assaults they receive on the Internet. They are threatened with rape, beatings and murder on a daily basis.  Yet the perpetrators are allowed to decide qualification for the most powerful position on earth.

How would your company fare if every decision was put to an employee vote?

“We have the opportunity to take on a huge customer. It means we are all going to work much harder. All those in favor?”

“Times are tough. We need to cut back on staff. Please decide who gets laid off.”

“I have an excellent offer to purchase the business. A show of hands, please, to determine whether or not I will accept it.”

Crazy, right? Your employees often can’t understand the bigger picture. They don’t see the implications down the road, even if you try to explain the eventual upside of a decision. They don’t share the responsibility that comes with making hard or critical decisions.

Yet, like the email harassers, we’ve decided that voters don’t have to evidence any responsibility for their actions. They can exercise their franchise, and then expect others to deal with the consequences of their decisions.

“In a democracy, people get the government they deserve.” Joseph de Maistre

‘Real  liberty is neither found in despotism or the extremes of democracy, but in moderate governments.” Alexander Hamilton

If this post inspires you to call me names or impugn my character, please don’t bother. I screen comments (there’s no universal right to mouth off here!) If you agree or disagree, and can do so civilly, feel free to contribute your opinion.

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4 Responses to Extreme Democracy

  1. Great post. Furthering this conversation, I highly recommended Dan Kennedys book: No B.S. Ruthless Management of People & Profits…..a word of warning you will need some thick skin, some honest self evaluation, and Clarity to really appreciate the valuable lessons taught in this book.

  2. David Basri says:

    Here, here! (with respect to our British forebearers).

  3. Martin Frey says:

    Well said. True freedom comes when we are obedient and submit to something greater than ourselves. Human are funny animal in search of transcendental joy yet they typically look for it in “things” and fleeting pleasures.

  4. Chris Christianson says:

    Very well said. Not all are qualified to lead and thus should be grateful to those that are!

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What Does HR Do?

What are the roles of a Human Resources professional in your organization? A common rule of thumb is that a company should have a dedicated HR function once it reaches 80 employees or so.

This post comes from a recent meeting of a business owner peer board that I facilitate. Many thanks to the group for this excellent analysis. The ratio of employees to HR specialists ranged from about 60:1 (for companies comprised mostly of professionals) to 120:1 (for those with  a high percentage of production workers.)

Human ResourcesEveryone starts by hiring someone to administer benefits. That is more of a clerical position, and doesn’t necessarily require specialized education or training in human resources. Once we start writing paychecks for a professional HR manager, however, we often struggle to determine which higher level functions they should assume.

I’ve broken down the list of potential responsibilities into three categories, acquisition, retention and strategic support.

Acquisition: This is the first area of responsibility beyond benefits administration. The HR professional should be systematizing and supervising the recruiting process. Are all candidates going through the same interviewing process?  How do you measure return on investment for advertising? Would the company benefit from an internship program, and how are interns selected and ranked? Which openings are worth retaining a headhunter, and which can be handled entirely in-house? How is a request for additional staff justified and approved? Is there a system for integrating new hires?

Retention: Are performance reviews conducted systematically, consistently and on time? Is training or mentoring available and utilized to help people move along on a career path? Are salary and benefits competitive with others in your industry, and with other companies in your area who seek the same type of workers? Is there a process for handling complaints objectively and in the same manner for everyone? The HR manager also assumes responsibility for morale, including regular employee satisfaction surveys and company events.

Strategic: These functions should be expected from an HR Director position. They include designing and purchasing insurance (in many companies, the third largest single expense item,) government compliance/reporting and succession planning for key positions. An HR Director can also project future labor costs for budgeting, and support the executive team with assessments of labor market conditions and potential threats to the company. They are also responsible for the company’s image in the community, and its role as a corporate citizen.

In a small business, every one of the responsibilities listed above are yours. I’m sure some of you are saying “That’s all nice, but I am running a business. I can’t spend all of my time on HR activities.” True; but if you grow they will become increasingly important, especially in tight labor markets like the one we are currently experiencing.

Whether you are hiring your first HR specialist, or have one who is asking “Where do I go from here?”, I think this list is a fairly comprehensive look at how much a good professional can do for your company. After all, you can’t do anything without your employees.

Do you think we missed something? Please add it in comments.

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Posted in Entrepreneurship, Incentives, Leadership, Managing Employees, Strategy and Planning | Tagged , , , , , , , , , , , , , , , | 3 Comments

3 Responses to What Does HR Do?

  1. John Vena says:

    I think you have done a good job describing most aspects of the role of an HR professional, but you haven’t touched upon “discipline”. In our organization, 60 plus employees, we use an HR contractor. In addition to those areas mentioned, a large amount of their time is spent supporting supervisors and department heads on how to respond to issues ranging from harassment claims to customer service complaints, attendance and general behavior problems. You haven’t addressed activities such as tracking discipline, conducting investigations, coaching managers and employees with policy or behavior infractions. Would you assign such tasks to the HR role as described by your “peer group”.

    • John F. Dini says:

      Excellent point, John. I don’t think it is appropriate to have HR actually conduct discipline, but making sure it is complaint with both government and policy, administered even-handedly, and that management is supported when claims arise should certainly be in there. Perhaps the group just doesn’t have any discipline problems. (wink)

  2. Hi John,
    It is true, that, HR activities are very important if you grow, Choosing and Hiring qualified leads are crucial.
    Thank you for sharing your knowledge unto us.
    I really appreciate your work. Great job and Keep it up John! 🙂

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