Does Technology Help or Threaten Small Businesses?

Posted on April 14, 2013 by John F. Dini

A small computer service company wants to sell Microsoft software licenses to its customers. They send an employee to become certified in licensing. (Microsoft offers some 600 variants.). As soon as they purchase a license, however, Microsoft begins soliciting that customer for other software, add-ons and renewals.

Amazon is building ten distribution centers of 1,000,000 square feet or more. Their professed strategy is to deliver most products, from flowers to televisions, anywhere in the continental United States within one day of the order being placed on the Internet.

A small creative agency has for years made its living doing logos and websites for local businesses. Now logotournament.com can provide 20 or more designers and hundreds of concepts for a few hundred dollars. GoDaddy.com will host websites starting at $2.99 a month, or a full year for what it costs the local shop to pay a single developer for an hour.

The Gini Coefficient measures the disparity between rich and poor in a nation. A coefficient of zero means that everyone has exactly the same. A coefficient of 1 means that a single person owns everything. In the US, the coefficient has increased by about 20% over the last 30 years, meaning that more wealth is concentrated in the hands of fewer people.

Some politicians point to that shift as de facto evidence of the evil greedy rich amalgamating wealth at the expense of the common folks. In reality, the addition of a few score billionaires has relatively little impact on the largest economy in the world.

small_vs_bigStudies show that the disparity is increasing in all of the developed countries, and one of the biggest culprits is technology. Desktop computers have eliminated the typing pool. All-in-one printer/copiers have crippled the small print shop industry. Email and online document storage are chipping away at the employee populations of UPS, FedEx and the Postal Service. Millions of jobs that paid middle-class wages without requiring extensive education or skills have been automated and eliminated.

The same thing is happening in the battle between small and big business. In the quest for increased revenue, big business keeps moving to fill the entire space between the product source and the end user. Wal-Mart started by corralling the consumer, then worked its way back up the supply chain to eliminate distributors, consolidators and finally, the manufacturers themselves.

Amazon is doing it by replicating the convenience of last-minute local purchase. Microsoft is using technology to approach millions of end users individually. Internet disrupters like LogoTournament are commoditizing personal services by creating global access to low-cost providers.

In the battle for customer relationships, small businesses are also utilizing technology. Inside sales departments can touch accounts more frequently by telephone and email without the expense of paying someone to drive from customer to customer. Electronic newsletters and on-line ordering reduce the cost of transactions. Dependence on technology, however, puts a small business in the same sandbox as the giants. What is the difference between ordering hardware on-line from the local fastener jobber, and doing the same thing on-line with Amazon, if both can deliver the next day?

Eight-five percent of face to face human communication is non-verbal. Relationships are built by human beings looking at each other. For decades advisors have told small business to differentiate with service; that closeness to the customer is the ultimate trump card over the faceless technology of giant competitors.

Duplicating the technology of the giants isn’t getting you closer to your customer. Look over the list of your best customers. How many have you seen face-to-face in the last three months? In the last six months? If it is longer than that, you may be holding your own in the technology battle, but losing the war.

photo credit www.amazingbusiness360.com

 

Posted in Entrepreneurship, Marketing and Sales | Tagged , , , , | 2 Comments

2 Responses to Does Technology Help or Threaten Small Businesses?

  1. Jim Marshall says:
    April 14, 2013 at 12:31 pm

    I agree with the well stated information about how big business is encroaching on small business and stealing market share. I also agree with the need for small business to exploit its potential advantage of face to face contact and potential relationship building.
    I feel, however, additional articles ought to deal with what local business people need to do with those opportunities for face to face contact. Too many businesses make the contact with meaningless, and time wasting efforts instead of those which can add value.

    Reply
  2. French says:
    April 16, 2013 at 12:28 pm

    Digital “relationships” are rapidly replacing face-to-face interaction. We’ve heard all the excuses… plane tickets are so expensive… it’s so easy to just sit at my desk and send an e-mail… with social media I make them come to me, etc… I addressed this subject recently in a blog.
    http://bigskyassociates.com/2013/03/look-me-in-the-eye-and-say-that/

    Reply

Leave a Reply

Your email address will not be published. Required fields are marked *

1,2,3 Red Light!

Posted on April 7, 2013 by John F. Dini

Last week I was a guest on Jim Blasingame’s Small Business Advocate show. The topic was a riff on my article of a couple of weeks ago about excising infectious employees. One of the issues that we discussed was identifying a toxic employee who is a model performer to your face.

Jim asked (not because he doesn’t know, but because it’s his job to ask) “How do you know if an employee is behaving badly behind your back?” The answer is to seek feedback from other employees whom you trust.

As a business owner, how often have you terminated an employee while wondering what kind of issues it would cause with the rest of the staff? Then you were surprised when the reaction from his or her coworkers was “What took you so long?”

Your reaction was probably some variation on “Why didn’t you tell me?” It’s a valid question. When employees see a coworker who behaves duplicitously, showing one face to the boss and another to the team, why don’t they come to you and discuss it? Don’t they trust you? Is your employer-employee relationship so shallow that they don’t think you are really concerned about performance? Do they think the core values or mission statement on the wall is just BS?

It’s probably some of each of those things, along with a bit of maneuvering by the problem individual. Those folks seem to have a knack for claiming your name as authority for their actions.

If you have a very trusted employee, one who serves the function of the grizzled sergeant in the platoon, you may have the problem licked. If not, you’ll need to find a way to get honest feedback from your employees about each other. In a small business, a full 360 review, one that asks questions about performance and behavior from superiors, co-workers and subordinates of each employee, is cumbersome and time consuming.

Cool-traffic-lightOn Jim’s show, I brought up a “Stop Light 360” that I’ve used in the past. I didn’t invent it, but like any good consultant I saw it or read about it somewhere and incorporated it into my tool kit. It’s fast, simple, and can give you startling information about what is going on in your company.

Here’s how it works. List all the employees of your business (or of a department if you have a larger company) on a sheet of paper. Distribute one such list to each employee. This isn’t anonymous, although you will keep the results confidential. Ask only one question, which should be printed on the form to reduce misinterpretation.

The question can vary, depending on the results you seek. It might be “How do you rate your working relationship with each employee?” or “What do you think the chances are that this employee will be here a year from now?” They answer for each person with a “stop light” methodology. Red for bad, or no chance. Yellow for maybe or I don’t think so, and green for yes or no problem.

When collected, the answers can be transferred to a spreadsheet. It should look like a map book mileage chart, with employee names down the side and across the top. The results are often very surprising.

An employee you thought was popular draws red universally, or one you thought was a top performer is all yellow. Often employees whom the boss considered marginal performers get green lights from everyone else. Of course, this isn’t something you can share, but it can be vital information for you.

Managing people is the most important part of an owner’s job. A Stop Light 360 helps you understand what happens when you aren’t watching.

 

Posted in Leadership, Management | Tagged , , , , | Leave a comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Why Great Salespeople Make Lousy Sales Managers

Posted on April 2, 2013 by John F. Dini

It’s been said so many times that (at least I hope) it is a business axiom on the same level as “cash is king.” Promoting your best salesman to sales manager is guaranteed to cost you a great salesman and leave you stuck with a lousy manager. The belief is so widespread that I’m amazed that owners keep doing it, and yet owners keep doing it. Why?

There are several reasons. First, an ambitious salesman (or woman) wants to get ahead. In most organizations, “getting ahead” means promotions and titles. It’s natural, actually inevitable, that they seek recognition as the “lead dog” on the team.

On the owner’s side, he is discussing it not only with a high performer whom he wants to keep happy, but one who can sell. If the salesman is truly gifted, he probably has developed a pretty cogent argument as to why he is the best candidate for the job.

throneThe salesman will argue that he can lead by example. From the owner’s perspective, who could be better to show the other salespeople how to sell than the one who does it best? Even if his message is no more than “watch me” it has to generate some positive effect.

In addition, there are the issues created by promoting someone else, or hiring from the outside. If your top performer is resentful or uncooperative, there could be dramatic consequences.

So the owner makes the move, with the usual stipulations. “Bob, you’ve never been great at paperwork, but you will now be responsible for tracking everyone’s activity. You will be expected to develop plans and procedures, and you have to follow our HR policies when dealing with your direct reports.”

The salesman, knowing that he is a hair’s breadth from closing the deal, of course agrees to everything.

The new sales manager starts off great guns. He has team rallies, and implements a new incentive program to reward high performance. He travels with the other salespeople, showing them how he does it by closing their biggest prospects for them, and upselling their marginal customers on additional lines.

Here is a menu of general variations that may happen next.

  1. The manager will tell his people “I’m not worried about reports, only results.”
  2. The salespeople will complain that the manager is giving special deals to their customers that they can’t duplicate.
  3. The sales manager will start to irritate his management colleagues by showing up late or being unprepared for meetings. (He is always late for his own sales meetings.)
  4. Department turnover will increase as salespeople are being chastised by the manager for “making me look bad.”
  5. The manager will start ignoring direct reports whose performance is mediocre.

Great salespeople are egocentric, adept empathizers, and skilled improvisers. There is nothing wrong with those traits, but they aren’t core competencies for someone who needs to teach, manage and develop others. Often the owner winds up stuck with the managerial tasks of running the sales department, working around the gaps in the manager’s performance.

That doesn’t alleviate the pressure on an owner to satisfy the top salesperson. Compensation isn’t enough, it has to be recognition of his special status in a way that doesn’t undermine the person he reports to. If you can’t navigate that minefield, you will wind up wasting resources circumnavigating the resulting issues.

A title with limited responsibility, participation in higher-level discussions, special status symbols such as a separate credit card where the employee keeps the points, or an automobile may do the trick. But for heaven’s sake, don’t make him a manager.

Posted in Leadership, Management, Marketing and Sales | Tagged , , , , , | 3 Comments

3 Responses to Why Great Salespeople Make Lousy Sales Managers

  1. Edward Dimmer says:
    April 20, 2013 at 12:19 pm

    Interesting article! We as so many other small business’s are always looking for what we believe will make a great sales manager. We usually do not give enough recognition to our top performers, but will seek out rewards for them.

    Reply
  2. Mark says:
    April 20, 2013 at 2:56 pm

    Unfortunately, you are spot on here…in most cases. A better alternative than promoting top salespeople into management could be creating a mentor program where the top salesperson is more of a “Team Leader” who mentors new salespeople for a slice of their commissions. Doesn’t cost the company a dime, give the top salesperson a promotion and title and disseminates best sales practices throughout the team. As a new salesperson, I would take that deal all day.

    Reply
  3. MM says:
    April 24, 2013 at 3:12 pm

    This viewpoint may work from a 10k ft view, however; each situation needs to be looked at on an individual basis. For example, I have always been in the top 5% of every sales team I was a member. One of my clients enticed me to take over a struggling sales team due to his promoting the #1 salesperson into managment. While having my own growing pains, I soon discovered the key to success in transitioning to management was to alter my “mindset”. All of a sudden my ego needed arrested and I had to get my “kudos” for watching others grow due to my leadership. All of a sudden I was a member of the support function and whether during “ride along” sales calls I may have done the entire process – when I got back to the office I put the salesperson out front and said “look what they just did”. Most successful salespersons cannot stand the hit to their ego. Here is one that successfully made the switch.

    Reply

Leave a Reply

Your email address will not be published. Required fields are marked *

Happy Ostara: Owner Infallability

Posted on March 31, 2013 by John F. Dini

The origins of Easter are lost to history. I don’t mean the Christian holiday celebrating the resurrection of Jesus, or even the Jewish holiday of Passover which it matches on the calendar. In fact, the name Easter is a derivative of the Saxon holiday celebrating the goddess Oastare or Eostre, who influenced fertility.

Some mythologists say that the Ancient Greeks’ traditional sacrifice at the Spring Equinox to Artemis, the goddess of hunting and childbirth, included a hare for good hunting and an egg for fertility.  Rabbits and eggs have been associated with fertility since prehistoric times. That tradition survives today in the Easter Bunny.

So much of what we do is grounded in what came before. In running a business, we face the ongoing danger of teaching employees to follow procedures long after we’ve forgotten the reasons for doing something in a particular way. We try something, it is successful, and we make it policy.

There are many versions of the idea that success is a poor teacher. One is epitomized in the conversation between the young entrepreneur and his successful mentor.

“How do you avoid making bad decisions?” the mentor is asked. “Experience” he answers.

“How did you get all that experience?” “Lots of bad decisions.”

Any business owner carries the burden of employee expectations. They expect that we know all the answers, or at least we should. We teach people how we want each job done. In a small business, the owner probably wrote both the job descriptions and the procedures for accomplishing each critical task.

Super Businessman bxp156008hI don’t know any owners who really think that they are infallible, but it is a creeping threat. When employees look to you for all the creativity, for every new idea  and process, it’s easy to fall into the infallibility trap. “I said it, because I KNOW. Because I know, it has to be right. If I am always right, you shouldn’t change it.”

Just because an employee shouldn’t have the ability to change procedures on a whim doesn’t mean that you can’t. It is your job to experiment, to seek constant improvement. Don’t get caught in the trap of letting employees tell you that you aren’t following procedure. Instead, look at why you aren’t complying with your own process. Is it too difficult or complicated? Is the way you are doing it an improvement?

Of course, sometimes we don’t comply with our own procedures because we are confident that we don’t need the controls and checks on quality that we insist on for everyone else. That’s just another version of the infallibility complex.

 

Posted in Leadership, Management | Tagged , , , , , , | 2 Comments

2 Responses to Happy Ostara: Owner Infallability

  1. Jason Myers says:
    July 24, 2014 at 6:42 am

    I’ve been following your blog for close to a year and this is my favorite post. Glad you decided to re-run it because I missed it the first time around.

    Reply

Leave a Reply

Your email address will not be published. Required fields are marked *

Cutting Out Employee Infection

Posted on March 24, 2013 by John F. Dini

A client found himself in an unenviable position. The cancer of negativity had spread through his management team. He knew the sources, and was prepared to clean house. Where should he start?

First, some background. The company was a bootstrap start-up founded by an inexperienced young owner that grew rapidly for almost ten years. Without a mentor or much experience, he relied on his intelligence and work ethic to figure out problems as they arose. Most of the original management team, chiefly the owner’s acquaintances from local businesses and personal contacts, had reached their limits of competence about halfway through the expansion curve. With considerable personal angst, he replaced those who couldn’t keep up with new “professionals” experienced in specific areas of operations.

I put professionals in quotes, because although they had experience, their recruitment came with a price. A low price. It was typically a lot more than their predecessors earned, but it still wasn’t near the top of the market. When you are struggling with personnel who have no training for the job, folks who know even a little bit seem like a big step up.

Complaining-EmployeesAs the business continued to grow, these new managers increased staff and lowered expectations. They quoted their own experience as authoritative. Deadlines just “couldn’t” be met. It was never the right time for new initiatives. They began criticizing the owner behind his back, telling coworkers that his lack of business knowledge had led him to set standards that were unrealistic.

Eventually their criticism became a widespread culture around the headquarters of feeling overworked, underpaid, underappreciated and stuck in an organization that offered little future. Despite their attitudes, the owner’s personal drive kept the company growing.

Finally, the owner made a couple of key hires at competitive salaries. His eyes were opened by the ease with which these new players did their jobs. It turned out that his expectations weren’t unrealistic, he just didn’t have the right people on the bus. He knew that reaching the next level required some wholesale changes in his core staff, but where to begin?

If he replaced an underperforming manager, he would saddle the new hire with an unresponsive staff. If he replaced multiple managers (three in total) in a brief time, he risked completely unraveling any coordination (poor as it was) between departments. Piecemeal replacement carried the danger that new hires would be corrupted by the bad culture before he could finish the replacement cycle.

He debated how to begin. Should he start with the most rotten apples; those who seemed to be the center of dissatisfaction? Should he start with the least competent performers? Should he start by changing out a whole department? That way, he could focus his attention on getting one part of the business running correctly, them move on to another.

Sometimes radical change is called for. Let’s not be smug about how he got into the situation. We’ve all kept mediocre performers because it was just to inconvenient to replace them, or at least right now. When you are growing rapidly and fighting fires, it is easy to let two, or three , or even more of those poor performers linger.

In the end, a hybrid approach got him through the change. In one department he replaced the manager, moved two employees to different areas of the company (for which they were better suited), and let the new manager hire a strong assistant. That was complete turnover in the department, but the repositioned employees were still available for some guidance and corporate knowledge.

In a second, he let the manager go and outsourced the function, hiring a lower level person to coordinate with the vendor. In a third,  he hired a strong second in command, outsourced a major labor-intensive function, and then reduced staff, letting the malcontents (including the manager) go.

The planning was extensive, but he managed a complete turnover of almost all staff functions in a month of activity that resulted in happier employees, a much improved culture, and better quality of work.

It wasn’t not easy, but when was running a small business easy?

Posted in Leadership, Management | Tagged , , , , , | 1 Comment

One Response to Cutting Out Employee Infection

  1. Edward Dimmer says:
    March 25, 2013 at 8:57 pm

    Last year our production manager had a verbal blow out as he felt our goals were too difficult to achieve. I gave him three paid days off and he had a vacation after that. He decided to move on (much to my relief and financial relief). I now have two assistant production managers who have easily met our goals. they accomplished their goals because they did not know “it could not be done”. It is amazing what can be accomplished when we do not know what the limits of ingenuity are.

    Reply

Leave a Reply

Your email address will not be published. Required fields are marked *