Off to Planet Ten!

I confess to being a fan of really, really good "B" movies. What is a good, bad movie? It's one that knows it's a bad movie, and lets the audience know that it knows. I haven't seen it, but Piranha 3D notched the http://www.rottentomatoes.com/ review scale at 82%. That is like "Godfather" level ratings. That's not because it's a great film, but because it knows that it isn't.

One of my favorites is "Buckaroo Banzai Across the Eighth Dimension." Just imagine Christopher Lloyd, Peter Weller, Jeff Goldblum, John Lithgow and Ellen Barkin camping it up with corny lines and ridiculous scenes. No plot synopsis is necessary. That would miss the point.

In one scene Lithgow is leading cheers for a bunch of aliens (don't ask.) He shouts from a raised platform:

"Where are we gonna go?"
"Planet Ten!" They all scream.
When are we gonna get there?"
"Real soon!"

The funny thing is that he has been leading these aliens for three quarters of a century, and you just know that "Real soon!" has been the strategy from the beginning.

Many small business owners are using the Buckaroo Banzai strategy with their employees right now. When is this recession going to end? (Real soon.) When are we going to hire more people to help us? (Real soon.) When will we start getting raises again? (Real soon.)

I just read another article about the breadth and depth of the debt problem. If you read my last post, you know that it hasn't nearly worked through the system yet. On my bad days I see doom and gloom, but even on my good days I can't imagine returning to the loose money and Chinese-financed boom of the early 20-oughts. The numbers are just too draconian to be ignored. Our economy still has the bulk of the price yet to pay for the bubble, and stimulus money has just delayed the inevitable, not made it disappear.

Start now letting your employees know the truth. Their concept of real soon isn't the same as yours. Consider practicing some limited open-book management, if you don't already. Give them some metrics, the numbers you'd have to reach to begin hiring or expansion. If you've absorbed losses, tell them what has to be recovered before there will be earnings to spend again.

In the last quarter, more people left their jobs voluntarily than were terminated or laid off. Employees are moving because they have shorter time frames than owners, and no experience in riding out a prolonged downturn. They think that the problems or tightened belts are only in their companies, not in the ones down the street.

If you want to keep your best people on board both physically and mentally, it will take honest communication. Not doom and gloom speeches, but not "Real soon" either.

The Long Road Ahead

I'm sitting in Denver International Airport after yet another conference. Fortunately, it's a whole 9 days until I have to come back here for another one.

In January of 2009 I wrote a blog on the strategic Triple Threat. The first threat was a severe recession. Second was a slow and painful recovery. Third was a changed economy where spending and consumption would settle at new, lower levels.

I attended a presentation by an economist from the Federal Reserve yesterday. His news was pretty solid evidence that we are still in phase two- the slow and painful recovery. His main points:

• Corrective data are coming in on the 2.4% GDP growth announced 2 weeks ago for the second quarter, and they are massive. The Fed is now planning for a revised estimate of 1.1% . The markets buckled at the 2.4% (initial expectations were for 3.7%) I don't see how their reaction could be good when this comes out in a few weeks. 
• No internal tracking indicators are positive. He said " I repeat. The Fed does not have a single positive tracking indicator."  
• Employment increases are rising slower than workforce population increases. There will be no drop in the number of unemployed people in the foreseeable future.  
• Savings (published at 3-4%) may actually be running at 6-8%, and much higher for those with disposable income. All of the increase may be in the top quintile of household incomes. The 2nd quintile is steady. The bottom 3 quintiles of population are sinking further into debt. This portends no further recovery in retail or consumption.
• Bond yields may be reaching the end of a 30 year cycle. The last 2 years are actually above the long term trend line. We are re-entering a bond market like 1953-1982, when bonds were investments for widows and orphans. He said that bonds are the current bubble. 
• Only 50% of all banks are actually lending at all. Money for construction and development continues to shrink. Regular commercial real estate lending is steady. Commercial/Industrial lending is on life support. No small biz lending at all. (It appears that limited SBA guarantee funds may be going to formerly commercial-qualified deals, freezing out SBA traditional clients.)  
• Residential mortgage delinquencies not only aren't slowing, but the rate of increase is accelerating. Commercial mortgages are no better, but lag 2 years behind the residential curve, so that bubble hasn't really burst yet. 
• 80% of TARP bailout money is still in banks. It will be a long, long time before they have to give up arbitrage in favor of actual business lending.

He was not concerned about deflation. The fact that Bernanke acknowledges it and has committed the FED to any inflationary tactic necessary to counter it renders it moot. He said that the Fed "has plenty of tools left." The current tactic is to print money and lend it to the government to cover deficit spending. I'm not sure what could be more inflationary than that, but he seemed to think they could do more.

Another source who specializes in residential real estate foreclosures cautions us to remember that Fannie and Freddie, besides being broke, are sitting on 7.5 million foreclosed homes rather than dump them on the market just before the election. Look for residential property to take another hit after November.

I know that we are all sick of the recession, but that doesn't mean a damn thing.What should you do? To paraphrase the words of Admiral Chester Nimitz after Pearl harbor: "Keep your powder dry. Watch for opportunity. Take action as soon as you see an opening."

If you've made it this far, you are already running lean and mean. Competitors are falling. Better employees are available for job openings. Bargains are available. Cash is still king, and will remain so. Negotiate hard, and spend carefully. If you thrive on adversity, the best may be yet to come.

Whose fault is it?

In small business, we tend to give out titles with aplomb. You can be a manager. You're a director. You are a vice president. When there are few levels to differentiate between, it seems meaningless to attach a lot of weight to a title.

Your receivables clerk comes to you and says "I think I could get more respect when I collect if I was the Accounting Manager." You agree. What harm is int it?

After a couple of years he or she has a review. "I've been the Accounting Manager for three years. I feel like I'm going nowhere. I would like to be promoted to Controller." What's the difference? Should you dole out the Controller title?

So how do you discern the difference between a supervisor and a real manager? Each directs the work of other people. Both have responsibilities. Is it just a matter of degree? I know construction supervisors who oversee millions of dollars and scores of employees and subcontractors. I know managers in small companies with just a couple of direct reports, yet they are as talented in managing as anyone. What is the difference?

Here's a quick measure. When something goes wrong, whose fault is it?

The supervisor says "It's their fault. They didn't do what I told them to do."
The manager says "It's my fault. They didn't do what I told them to do."

The supervisor sees his job as telling people what they should do. The manager knows that his job is getting them to do it.

Mission, Vision and Values: Weighing in on the Definition War

The other day during a continuing education class, the old argument came up again. "These are the kind of things that belong in a company's Vision Statement," the instructor said. "I thought they were Mission Statement kind of things," replied a student. And off we went. What was Mission? What was Vision?

It started out in the 60's with a shot across the bow from the B-school types. "No organization can succeed without a Mission Statement," they intoned.

So we created Mission Statements. A lot of them (actually the majority) were generic. Most used the Chinese menu approach. Take one from column A (our quality,) and one from column B (our customers.) Add two side dishes (mandatory nods to our great employees and the community) and you have a Mission Statement.

We proudly promoted our generic and uninspiring mission statements. We put them on letterhead. We engraved them into plaques. We had then carved into the lintels above the front doors. And no one paid much attention to them.

"They are insufficiently inspiring!" said the B-school consultants. "Merely describing your mission isn't enough. You need a Vision!"

So we looked farther over the horizon, and wrote new statements. Some of us threw out the Mission Statement, because now we had a superior Vision Statement. Some of us had a Mission Statement and a Vision Statement. Better yet, still others rewrote their Mission Statement to begin; "Our Vision is..." thus solving two problems with a single stroke.

Now, in the enlightened 2000's, we discover that we still haven't inspired our people to know what we stand for, what is right, or even to know what we do. We need a Values Statement to tell them our view of right and wrong.

Is the Mission the guiding principles of the organization, or is it the Vision? If the Vision is what you aspire to be, why do you also need a Mission? If either is your "big picture" of how you fit in the world, why would you need a Values Statement?

The truth is, any one of them is better than none, and one done well is worth far more than all three done poorly. If you want to cover all the bases, here's how I see the definition of each.

The Mission Statement is what we are. It is intended for external readers, and is the statement that goes in your marketing literature. The Vision Statement is where we are going. It outlines the ambitions of the company, and is more oriented toward internal stakeholders. The Values Statement is how we behave along the way.It gives employees a framework to guide their day to day decisions.

So for Amalgamated Widgets inc. they would read something like this.

Our Mission
Amalgamated Widgets fabricates and distributes automotive, aviation and sports-related widgets worldwide to customers who will accept only the highest quality and assured on-time delivery.

Our Vision
The Vision of Amalgamated Widgets is to be the premier supplier of choice for OEM manufacturers in every market where we compete. By maintaining our commitment to research, cutting edge technology and a highly skilled workforce, we will consistently lead our industry in both innovation and profitability.

Our Values
Amalgamated Widgets expects each associate to place quality before expediency, dependability before convenience, and family before all.

The Mission Statement discusses the company's differentiation and business focus. The Vision Statement focuses on competitive strategy, and the Values Statement talks about the commitment it takes to fulfill the vision and the mission.

Of course, someone out there will argue that I've got it all wrong. Your comments are welcomed.

I Guess I are One...Finally!

I just read Malcolm Gladwell's book "Outliers." Like The Tipping Point and Blink before it, he gives a very readable and fresh insight into things you thought you knew, or kind of thought you knew but never really applied logic to, or maybe never thought about at all, but are glad to know.

One of his fascinating observations is the 10,000 hour "rule." He says that it takes 10,000 hours of direct experience to become truly proficient (at anything) on a world-class level. Ten thousand hours is a lot. He delivers several anecdotes about how this happens

Bill Joy (creator of Unix and Java), Bill Gates and others were placed in unusual circumstances as children, giving them massive access to computers before they were available to the general public. Gates, for example, would sneak out of his house in high school to use the university computer between 3 and 6 am; because no one would kick him out then. He attended a school that had unusual access to computers, and had even more access at home.

Professional athletes spend more time in their youth on all-star squads with greater practice requirements, and frequently play one sport year 'round. They are also "gym rats" (or the equivalent venue in other sports) putting in endless additional hours refining their game. Michael Jordan is only one star of many who was known for "first to arrive, last to leave" practice ethic throughout his career.

How about those profiles of Olympic stars during the games? Michael Phelps swimming three hours each morning and three each afternoon, six days a week, 52 weeks a year. That's 36 hours a week, 1,900 hours a year, from age 12 until he becomes a world-class competitor at 17. About 10,000 hours.

The Beatles were bigger than any other band of their era. Why? Because of their unusual early history. They loved playing the strip-joint dives of Hamburg as teens and early twenty somethings. (No drinking age and unlimited sex. Go figger) Five years of months-long gigs playing from 6:00 PM to 1:00 or 2:00 AM, with no breaks allowed, because customers only came in if the music was going. In five years they played an estimated 1,200 nights. 10,000 hours.

I began wondering what it takes to be a true expert in a business discipline. A 40 hour work week would deliver about 2,000 hours of experience in a year, but how much of that experience is directly enhancing a skill? Swimmers swim. Musicians play music all the time. But do salesmen sell all day? Do managers manage every minute they are working?

If you were a salesman, for example, you would have to deduct travel time, report writing, sales meetings, coordinating with your secretary, learning new products, and market research. That's not to mention trips to the bathroom, calling home to see what's for dinner and checking your stocks on the Internet. How much of your time is actually spent in face-to-face selling? Is it 10%? 20%? At 20%, or 400 hours a year, it would take you 25 years to develop a sales skill level that was the equivalent of a rookie NBA player's skill at basketball. That assumes your 25 years were all spent in selling as your "full time" occupation.

I have hesitated to call myself a small business expert. I have about 33 years in management and running companies, but how much of that was doing one thing? I have always thought of myself as more of a generalist. I can sell, and I understand finance. I've managed lots of people, sold a substantial number of companies, and done strategic plans; but does that make me an expert in anything by Gladwell's definition ?

If I put all my certifications together I could string twenty-something letters after my name. But does 80 or 100 hours studying for a certification program, or even 500 hours getting an advanced degree, make someone an expert? Any of us who work in the real world knows that isn't the case.

If I've had a chance to be expert at anything, it is understanding the issues of a small business owner. For the last 13 years, since September of 1997, I've applied my experience in direct facilitation of meetings of business owners in The Alternative Board® and in coaching them one on one. Of course I wondered, is 13 years enough to be an expert?

For most of that time we've had 12 Boards, each one meeting for 4 hours each month. I have usually chaired 4 boards myself, and audit another meeting or two each month. Lets say 5 meetings a month on average, sometimes a lot more. 5 meetings x 4 hours x 12 months x 13 years= 3,120 hours listening to business owners solve their issues. That not even close enough to make me an expert.

During the 13 years I've coached between 30 and 40 clients personally at any given time. The coaching sessions last at least an hour, and often more. Let's take a conservative measure of 30 clients monthly at an hour each. 30 clients x 1 hour x 12 months x 13 years= 4,680 hours coaching business owners on their issues. That is a big leap in the right direction, but I still fall far short of "expert" by Gladwell's definition.

Most of the rest of my time (typically in a 60 hour work week) is spent in business owner related activities. I give presentations about The Alternative Board, plan and deliver seminars, meet with our contracted coaches to discuss clients, do lots of continuing education, write books and articles and sell businesses as a broker. While all of those are related to small business, they aren't actually dealing with the specific issues of individual owners. They are more the equivalent of the salesman doing call reports.

My face-to-face contact with business owners for the purpose of discussing their issues, ambitions and plans includes one or two lunches a week with those I don't coach personally, just to keep up. (Let's say 6-8 hours a month.) I interview an average of three to five prospective TAB members monthly at 90 minutes to two hours each. (5-8 hours). I consult directly, both as a favor to members, discussing the sale of businesses as a broker with owners who are considering an exit, and in paid engagements. That isn't all face time, but I can easily call it another 8 hours of face-to-face contact each month. Those one on one interactions total at least 20 hours a month, or another (20x12x13) 3,120 hours over the last 13 years.

Totaling 3,120 with 4,680 and 3,120 yields 10,920 hours of specific discussions with business owners for the purpose of tackling the special challenges, concerns, gratification and (sometimes) pure terror of being responsible for your own destiny. (Note: That's why this blog is called Awake at 2 O'Clock in the Morning. All business owners get it.)

Like the others named above, I owe the magic 10,000 hours to an unusual set of circumstances, and my own love of the game. I don't play golf, or hunt, or fish, or do much of anything else except work with business owners and spend time with my family. At least it appears that I've earned the right to claim expert status in my chosen profession. It's nice to know.