Top 5 Job Description Mistakes

Today’s blog post is courtesy of HR BLR.

Job descriptions—just the thought brings tears to your eyes. Yet job descriptions are central to hiring, compensation, and appraisal (not to mention avoiding lawsuits). Today, BLR editors reveal the top 5 mistakes managers make with job descriptions.

One key to getting them done right is to give someone responsibility—and put it in his or her job description!

BLR's editors have observed the following five commonly made mistakes in job descriptions:

Mistake #1: Mismanaging the Job Description Program

Often, job description programs suffer from a lack of attention. Answering these questions will help you to give your job description program a firm footing:

• Why do we need new job descriptions?

• What events or conditions indicate that this is the time to get involved in a job description program?

• What are the shortcomings of our existing job descriptions?

• To what specific uses will job descriptions be put?

• What are the projected costs?

• Who will be involved?

• Is top management committed?

Most organizations perform a regular review of job descriptions. Also consider revising job descriptions when:

• The job content changes (perhaps due to a new technology, for example) or there is a change in essential functions

• There is an organizational structure change

• The employee or his or her supervisor requests a review

• The only incumbent leaves the job

• There are continuous problems in a department or division

Mistake #2: Omitting Critical Elements of a Job Description

If key elements are missing from the job description, its effectiveness suffers. Most job descriptions contain the following elements:

• Job identification—Describes the job in a word or two

• Job summary or purpose—A brief narrative of the job that highlights its general characteristics

• Essential functions and additional responsibilities—Those duties that must be performed in the job

• Accountabilities—Not only the end results achieved when job duties are performed satisfactorily but also specific standards for measuring performance

• Job specifications—The specific job requirements in terms of "compensable factors" (During job evaluation, a point score is assigned and a wage rate or salary level is set accordingly.)

Mistake #3: Failing to Accurately Describe the Job

The typical job description is deficient in at least one of the following ways:

• It exaggerates or downplays the importance of the job.

• It fails to pinpoint the critical elements that differentiate between successful and unsuccessful job performance.

• It ignores the decision-making aspects of the job.

• It either fails to focus on the job incumbent's actual behavior or it defines required behavior in ambiguous terms.

• It describes worker requirements or characteristics that are not really needed to succeed in the job.

Mistake #4: Failing to Use Job Descriptions Correctly (or at All!)

Some employers think of job descriptions only in terms of wage and salary administration, or as a necessary evil when it comes to complying with certain employment laws. But these are only two of the many practical uses for job descriptions. Consider:
Wage and Salary Administration
Any compensation system requires that jobs be classified and evaluated in terms that make comparisons possible.

Legal Compliance

Job descriptions can be key evidence of legal compliance (or noncompliance) under a number of federal employment laws.

• The Americans with Disabilities Act (essential functions)

• Fair Labor Standards Act (who is "exempt" and "nonexempt")

• Equal Pay Act (fighting discrimination lawsuits based on pay)

• Title VII of the Civil Rights Act of 1964 (fighting discrimination lawsuits based on performance)

Collective Bargaining

Job descriptions have also been used by employers to defend themselves against what they feel are unjustified union demands for uniform rates.


Mistake #5: Forgetting Format, Organization, and Grammar
To achieve the two primary goals of job description writing—accuracy and brevity—you must check and double-check the words you have chosen to describe each job activity. Here are 15 guidelines regarding the use of words in a job description:

1. Use a terse, direct style throughout the description.
2. Keep sentence structure as simple as possible; omit all words that don't contribute necessary information.
3. Be clear and use nontechnical language whenever possible. A good job description explains the objectives, duties, and responsibilities of a job so that they are understandable even to a layperson.
4. Avoid imprecise words such as "situation," "facilitate," "interface," etc. Ask yourself if the word you have used might be interpreted differently by two different people.
5. Begin each sentence with an active verb, third person singular. Always use the present tense.
6. Wherever possible, describe the desired outcome of the work, rather than the method for accomplishing that outcome. For example, instead of "writes down phones messages"—a task-oriented approach—you might say "accurately records phone messages."
7. Focus on essential activities. However, remember that a task that is performed frequently throughout the day may not be as essential to the job as something done only once or twice a week.
8. Avoid the narrative form. You are writing a job description, not a story.
9. Be consistent when using terms like "may" and "occasionally." Their meanings should be spelled out to avoid confusion. For example, make sure that if the word "occasionally" is used in the essential functions section of the description, the occasional work performed truly is essential to the job.
10. Avoid words that don't tell specifically what the employee does, such as "handles." Others you may want to avoid: "checks," "prepares," "examines," "sends." If these words are the most accurate and specific ones available, it may be acceptable to use them. But if a more specific term would describe the task more clearly, use it.
11. Refer to job titles rather than people. For example, "Reports to Human Resources Director" instead of "Reports to Estrella Simpson."
12. Be precise in defining responsibility. The degree of responsibility given indicates the importance of the job and is a vital factor in evaluating it.
13. Qualify whenever possible. Don't just say that a file clerk "files" materials; say that the clerk "files alphabetically."
14. Stick to a logical sequence in describing duties and responsibilities whenever possible.
15. Remember that the length of a job description does not indicate the importance of the job. The job description for the president of a firm can be put into one sentence: "Responsible for the successful operation of the company."

New FTC Rules for Social Media

The new FTC rules on social media content go into effect 12/1/2009. And, for the most part the new rules are aimed at protecting the consumer from reading a blog about a product that presents itself as an editorial, when the "blogger" has been paid to promote the product and/or has been given the product
for free.

That's a good thing, right? Yup...we think so too. BUT, it does create a few things every marketer must consider--whether they run a blog and/or promote their products on blogs or other social media sites (such as Twitter).

The main crux behind the new rule is this...when endorsing a product or service (in a blog, tweet, etc.), you must:

1. Disclose when you are being compensated--whether you are being paid for the endorsement and/or have been give free sample of the product (traditionally known as "not-for-resale" copies).
   
   
2. Be truthful in your statements...and make sure they can be substantiated.
   
   
3. Speak from actual experience--meaning you can't just regurgitate the sponsor's marketing speak if it isn't an actual experience, opinion, or belief of your own.

And the fine for not doing so? $11,000 big ones.

Really, most legitimate marketers already follow #2 and #3, but they should now be much more diligent in making sure nothing slips through. The biggest change is the disclosure requirement--so make sure your social media efforts now have these new rules on the operations checklist (whether you are the blogger or the product company promoting through 3rd party blogs)...it's the law!

An Exercise

Nothing fancy. Just presume, for a second, that the post on Oct. 4 - The Triple Threat Phase 2 was substantially right. We will have a technical recovery from an economic perspective, but it won't feel anything like prosperity. Ask yourself two questions: 1. What will my business look like two years from today if the economy stays exactly as it is this moment? 2. What did I do to make my company that way?

Why Money Isn't Flowing From the Banks

Depending on who you are talking to the recession is over, will soon be over or isn’t going to be over anytime soon. Many small business owners are looking for financing. Many for growth and some because they just need a bridge to help get them through the current economic times. Funny though, regardless of how strong your financials are very few seem to be getting financing.

The SBA ARC Loan Program, a guaranteed $35,000 short-term relief loan for small businesses facing immediate financial hardship to help them ride out the current uncertain economic times and return to profitability, is rarely being received. Very few companies in Colorado, and throughout the country for that matter, have been granted the loan. Why, well amongst other things there is so much paperwork required that the banks don’t make any money. In fact, in many cases, they actually lose money.

Yes, banks should be helping us get out of this bad economy. But they aren’t. They don’t have to lend out money to be profitable. Here are just a few reasons:

• Banks have received TARP (Troubled Asset Relief Program) money to clean up their books.

• They are still making money on their credit cards.

• They borrow money from the Fed for nearly nothing and buy 30-year Treasuries at 5 percent. A nice profit for the banks considering they are using our (taxpayers) money.

• They still have their “toxic” assets that have been written down, and they will eventually provide a profit.

So where else can you find money? Well, that leaves private financing - anything from family and friends to Angels and Venture Capitalists and everything in between. There is private money out there but it is harder to get, more expensive and there is less of it. Since there are a lot of people looking for money our friends with money are pickier than ever in terms of whom they give their money too. And of course, generally speaking, deals take longer to put together.

So what can you do? Well, for education you can go to the Angel Capital Summit Nov. 17^th. You can also work on your business – make sure you have a solid business plan and supporting financial model. To learn more about how to do that attend Planning, Focus & Discipline… 3 Keys to Leading Your Company Out of the Recession on Oct. 21^st or 27^th. Investors want to know where you want to go and how you plan to get there. Having a compelling story with a solid plan to back it up will only help you. And last, but not least, talk to your local politicians. Until the Feds change the rules for the banks money will be slow in coming, which means jobs will be slow to come which will prolong the economic recovery.

Are You Negotiating Away Margins?

I recently met with a business owner who wanted to know how I trained salespeople in “negotiation.” After a little questioning, I was really struck by his misconception that their salespeople SHOULD be negotiating, which in layman’s terms is lowering price or offering some concession in exchange for a promise to buy.

Trusted advisors and top salespeople do everything they can to AVOID negotiating. Their job is to uncover the costs of the prospect’s problem and then to determine what budget is available to solve it BEFORE they propose a solution. The predominant problem many sales people have is that they simply aren’t comfortable talking about budget and cost impacts until the end of the sale. So they are forced to negotiate at the end, attempting to close the sale in spite of inadequate financial information.

Salespeople who rely on negotiation at the end of the sale usually exhibit these symptoms:

• Think that buying is primarily an intellectual process, not an emotional process

• Don’t understand the costs associated with the problem or what’s at stake financially early in the sales process

• Feel the product or service they sell is extremely expensive

• Are uncomfortable talking about other people’s finances

If you have salespeople that regularly require permission for a reduced price to get the sale or blame the competition’s price after losing the deal, look to the symptoms above to gain insight into the attitudes that drive these behaviors and outcomes. Please understand that I’m not saying that top salespeople NEVER need to negotiate. The point is to differentiate the strong salespeople who rarely need to negotiate from the weak ones that must negotiate every time to close a sale.

Examine the beliefs and behaviors of your salespeople when dealing with money issues, so they can minimize the need to negotiate at the end and sell more, more often!

Why Projects Fail and What You Can Do About It

I recently met with a young start-up company with a terrific idea and as I was listening to their story it reminded me that most companies have failed projects or at least late projects and usually don't know what has happened until it is too late.

What’s the first thing you think of when you hear a company has announced a product release date? How about when one of your competitors releases news that their sales numbers or revenues are off this quarter? If you’ve been around for a while, you might wonder when the real product release date is, and feel pretty confident, maybe even smug, that your own company is on target for its release date(s), sales numbers and revenues.

Or is it? How do you know? While no company gets products to market on time every time and has quarters where sales and revenue don’t meet targets, winning companies track these important project milestones, and continually try to answer the question “why?”:

• Why are we late to market?

• Why are sales not happening?

• Why are revenue projections not being met?

A variety of causes can create these business roadblocks to successful projects. Let’s take a look at some of the issues and questions that, if answered honestly, can help you make your programs be wildly successful.

Getting Products Developed and Launched on Time

Time-to-market is critical for most projects, and rarely will you find a business owner, product manager or product marketing manager that will say otherwise. So why are projects late, and what can you do to help bring them in on time? First, it is important to look at the big picture from an operational perspective.

Program Goals

• Have the goals, there are usually many, of the program been clearly defined and communicated to the team?
  
  
• What are the specific launch objectives? What is the timing?

Processes

• Have you outgrown your product development model?

• How effective are your development processes?

• Who manages your programs – program managers, product managers or engineering? How effective are they?

Once you have program goals and objectives and appropriate processes in place, you have three variables that can be adjusted in product development and launch - time, resources and functionality.

Time Issues

• Is your project scoped and clearly defined based on time to market?

• Can time be added to a program (usually not)?

Resources Issues

• Are appropriate stakeholders participating and adding value to the team?

• Do you have enough development resources?

• What benefit, if any, is gained by adding resources?

• Are marketing resources allocated for a successful product launch?

Functionality

• Are your features and benefits clearly defined?

• Have you prioritized your features by importance?

• Is there too much functionality relative to time and resources?

• If/when you have to cut features, do you know (based on market requirements) which features can go and what must stay?

Achieving Your Sales Numbers

Generally speaking, there is no single reason as to why sales numbers are not achieved. It is usually a combination of sales execution, product and/or company issues and lack of competitive intelligence, assuming that realistic yet aggressive sales numbers have been created based on current market conditions.

Sales execution

• How effective are your direct and indirect sales channels?

• Do you have partners that aren’t contributing?

• Are your direct sales teams focused on the right markets?

• Do you have a sales system that is used by the entire sales team?

• Is there a subsequent sales process that everyone follows?

Product/Company Issues

• Do you have the right product packaging, pricing, and service options available for prospects?

• Have you assessed your product mix and analyzed your product distribution strategy?

• Are the right products and services being sold by the right partners?

• How are your messages resonating?

• How high is the quality of leads generated by your marketing programs? Is your sales collateral useful in the selling process?

• Do you know why you win and lose deals? Do you analyze win/loss factors and evaluate and realign processes and potentially products?

• How are your manufacturing processes working?

Lack of competitive intelligence

• What is your competition saying about you?

• What competitive traps are you setting and what traps are your sales teams walking into?

• Has the competition positioned you as a follower?

Hitting Revenue Targets

Often sales and revenues goals are not achieved due to ineffective attitudes and behaviors exhibited by your sales team.

Outside of your sales team, there are other factors that may result in lost revenues: operational inefficiencies are one of the biggest culprits that can eat into your revenue stream. Review your internal processes – in EVERY organization – and measure your operational effectiveness. Things to look for include

• Quality issues (rework, waste, etc.)

• Inefficient use of resources

• Time – does it take too long to achieve the desired outcome? Why?

• Communications – how effective are your internal and external communications?

We will not go into other revenue impacting items such as travel, expenses, headcount, etc. We leave that for the CFOs.

So why is this really important? Let's face it, times are tough. Successful companies are positioning themselves NOW for the economic recovery. While we aren't expecting a rapid increase anytime soon, the bottom line is that new products and services will help increase your business. New products can get you into new markets or expand existing markets by offering new features and functionality. So take a look at your projects and make sure you set yourself up for success!

We’d love to hear your what you have done in order to make your projects successful. Leave us a comment.

The Triple Threat: Phase II

The following post was written by my friend and colleague John Dini in San Antonio, TX. It is very thought provoking. Let me know what you think. Enjoy.
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I am by nature a relationship-oriented person. I like people, and I want them to like me. I’ve been watching my clients struggle with this economy for what seems like forever. They all desperately want this damn recession to end, and so do I.

I don’t like to be the bearer of bad news, but I don’t think most of us are going to be very thrilled with 2010. My January posting on Planning for the Strategic Triple Threat was discussed by hundreds of business owners in The Alternative Board® around the country, and re-posted in places that eventually came back to me from surprisingly far afield. We are now entering Phase 2 of the triple threat, the slow recovery.

Last week I attended a presentation by John V. Duca PhD, Vice President of the Dallas Federal Reserve Bank, and another by Joseph Stiglitz PhD, the author and Nobel winning economist. Neither one said anything that I hadn’t already read or figured out, but nothing in either speech made me very happy.

1. What Underlies the “Recovery?”

I am going to be succinct in delivering the facts. Some are from the lectures and others from my own research. They speak for themselves.

Economic growth is projected to be positive again in the third quarter, by a fraction of a percent. This would mark the “end” of the recession.

Bank lending spreads are at 1930’s levels. (Any of my clients who have gotten their credit lines renewed in the last 6 months will attest to that.)

Unemployment is at 9.8% of the working population. The U-6 measure of unemployment, which includes those who have given up looking and who are employed part-time but still seeking a full time job, is at 17%.

Bank failures in 2009 are right at 100. That will probably double in 2010.

The household savings rate spiked to almost 7% in May, and continues in the mid 4% range, even against strong equity indices.

The total number of home mortgages that have been refinanced or principle-adjusted through government relief programs in the last 2 years is less than the average month’s new foreclosures.

Except for non-conforming jumbo mortgages, the US Treasury, via Freddie-Mac, Fannie-Mae or FHA, is currently underwriting 100% of the homes sold in the US.

Commercial property mortgages on bank’s balance sheets are still exempt from mark to market, disguising the real state of those banks for the moment.

The FDIC is bankrupt

$400 billion of the $800 billion stimulus will disappear without a trace

Asia has emerged from the recession. South America barely felt it. Neither is waiting for us to start spending again to move forward with their economic plans. Enjoy the Olympics in Rio de Janeiro.

The G-20 meeting in Pittsburgh tacitly accepted the need to move to a new world reserve currency from the US Dollar. Only the refusal of the host country to place it on the agenda kept it from being the major topic.

We have tripled our current deficit, which we are funding by “printing” money.

I don’t want to hold back, so I’ll toss in a couple more things that are more observation than fact, and then move to a discussion of what we should be doing.

Our government is currently focused on health care reform. Regardless of what you think about the programs or proposals, two things are plain. One, “budget neutrality” however that is defined, will come only at a substantial increase in the costs of employment. Second, it will not include the looming explosion in Baby Boomer Medicare, which predates the “reform” and is therefore not included in the calculations.

Both of the speakers, when asked about different events in the future, had disturbingly identical responses. “I can’t say. We are in uncharted territory.”

The Domino theory in Vietnam was a crock, but right now we have so many things falling on each other that the metaphor seems appropriate.

2. What does it mean?

Let’s look at the above facts in light of their effect on our businesses.

Economic growth and unemployment
The projections I’ve seen are for slow growth. Some say we will have a double dip recession: two quarters of replenishing inventories and the supply chain, followed by another slowing. That is the “W” shaped graph scenario.

Others say the recovery will be a “U.” Still others say an “upside down square root sign” meaning a long flat period. No one, absolutely no one, says we will have a “V” shaped recovery such as in the 90’s and 2002.

So growth will be slow, likely in the 1% to 1.5% range. Some, like Stiglitz, say we will face “3 to 5 years of Japanese style malaise.”

Employee productivity increases by an average 2.2% annually. It has been much greater with the layoffs and through the introduction of the PC, but 2.2% is the long term average. We are still adding about 1% to the working population annually; although that may rise due to delayed retirement by Boomers who have seen their savings shrink.

So we need around a 3.5% growth rate in GDP to absorb productivity increases and new entrants before we start shrinking the unemployment rolls. No one is predicting 3.5% growth in the next couple of years. In addition, we have to return all the employees on short hours or short pay before we hire anyone. Look for unemployment to stay this way for some time.

Consumer spending
As I pointed out in January, the explosion of credit led to a huge overbuilding of commercial space. More on that later, but the savings rate of all Americans has jumped from a negative 2% to about 5%. With consumer spending at 70% of the pre-recession GDP, that put almost 5% of the national economy out of circulation.

I learned a new term this week; “the paradox of thrift.” The more people save, the worse the economy becomes, and so the more people save. Add to that the 17% that can’t save because they don’t have enough for expenses already, and the consumer driven economy looks pretty grim.

The rising stock markets have pulled some of that money away from savings. I admit to not being clear on exactly how that’s figured. I think retirement account investment is savings, but direct investments are not, but I’m not sure. Either way, if we get a bump in interest rates and a slip in the markets, just watch how that savings rate spikes again. No one wants to be caught like they were last October.

Banking and Commercial Lending
It’s a good time to be a conservative, solvent banker with an underpinning of consumer deposits. You are borrowing from the Fed at essentially zero, and lending it out at the best spread you’ve ever seen.

The truth is, you need to make a lot of money because the FDIC just asked you to pay the next few years of your vastly higher deposit insurance premiums in advance. Ouch! The FDIC reserves didn’t even make it through a year of this mess. What happens when the next year is worse, and the FDIC has already borrowed through 2013? I’m betting on more special assessments, putting greater upward pressure on rate spreads. That slows business even more.

It could be worse. You could be one of the many (some say a majority) of banks whose balance sheets depend on commercial real estate mortgages. Office buildings and strip centers have low occupancy, and many of the rents are at discount. Here’s what that would normally do.

As a banker, I value your building by its income stream, or capital return rate. If you are projected to generate $100K in rents at say, 85% occupancy, and I expect a 10% cap rate, then I would value your building at $1,000,000. You put in $200,000 (20%) and I will lend you the other $800,000.

At the end of 2009 I look at your results, and find that you were only 70% occupied, and did some discounting, so that rents actually came in at $62K. Now your building is worth $620,000 by my calculations.

So I reset the value on my books, look at your remaining mortgage balance of $775,000, and nicely ask you to come down to the office with a check for $155,000 to make up the difference. That’s if I don’t ask you to bring $279,000 so I have an 80% loan-to-value ratio again.

What? You don’t have $155,000 (or $279,000) because your rents were down? No problem! Since TARP I no longer have to “mark to market” on my assets. So I can roll your financing for $775,000 on a $620,000 building because I judge, in my expert opinion, that over the life of the loan the asset will someday be worth as much as I have it on my books for. Neat, huh?

As Dr. Stiglitz said, there is seldom a good reason for markets with poor transparency to become even less transparent. Many banks will do this until their balance sheet becomes so unrealistic that they fold even though they are technically solvent under the current rules; thereby increasing the pressure on the FDIC.

Finance
By now, you are probably asking the same question millions of Americans have voiced, which is “Why don’t the regulators do something about this?”

Short answer: Because there are 5 (count ‘em, five) financial industry lobbyists in Washington DC for every Congressman.

Longer answer: Because our national legislature has lost any appetite for regulating the markets, (which just might be related to the short answer.) They will hold hearings on Merrill Lynch bonuses, slap a few people around, and move on.

Everyone (except those of us who are paying for it) is pretty comfortable with the current system. People in the financial industry get paid huge sums to take big risks with other people’s money. If they succeed, their huge paychecks get even huger. If they fail, we socialize the losses. That means everyone shares.

The institutions that were deemed “too big to fail” were merged, so they became even bigger. Now they are “too big to fix.” Where we used to let them crash, wiping out the debt holders and shareholders, now we “have to” save the mutual funds and union retirement funds, so we pay everyone off with tax dollars. Actually, we are paying it with your children’s tax dollars.

If you were proud of not being one of the spendthrifts, of not running up your credit cards, of not hocking your house to buy big screen TVs, I have news. Your government decided to do it for you.

The Deficit
My mom says “I know things are bad, but I live on Social Security and a few CDs. None of this really will affect me.”

Perhaps, but it really affects us all. The deficit makes us less credit worthy as a country. A recent issue of The Economist compared the US Federal Reserve Bank’s balance sheet to the Bank of Zimbabwe. Isn’t that comforting?

Maybe we’ll start getting emails from Fed employees, offering to transfer millions in frozen accounts if we just give them our bank account number. Oh… they already have our bank account numbers. Never mind.

The “Third World” is rapidly gaining. China has pretty much blown us out of Africa, as business goes. They are passing us in trade with Brazil, and the rest of South America is following. Their economy will grow at 6-7% this year, and that was in a recession. The developing world just passed the USA in total trading volume with China. We are now their second best market, and Europe is catching up fast.

China, Japan and the Middle East are acutely aware that they hold trillions of dollars in US debt; and that we are printing money to devalue our currency through inflation, making that debt worth less to them every day.

As long as they though they needed to lend us the money to buy their stuff, it was a price they had to pay. Now they are beginning to understand that they can get along without us. They will soon start to demand the risk premium that’s appropriate for debt that will decline in value over its lifetime.

In 1981 I was factoring our receivables at 6 points over prime. The prime rate hit 18%. That meant my first 24% in gross margin went to pay financing costs, before any operating expenses. Our company was snatched up at a bargain basement price by a German supplier who could borrow at more reasonable rates.

Our creditors’ big decision now is when do they want to step up and take the one-time hit? Money is a theoretical mechanism anyway. (Read “Greenback” by Jason Goodwin) Introducing a world trading currency would cause a huge fall in the dollar, but it would relieve their need to accept dollars, and the deflation risk that accompanies them, in the future.

For us, it means we start paying for our imports, especially oil, in a currency that has to be exchanged at whatever its current value is. We screamed about $4 a gallon. The Italian Lira buys gasoline at $4 a quart.

So how do we stop borrowing or printing money to pay our bills? It isn’t going to be easy. Take the stimulus bill for an example. Why aren’t we seeing the effect of an $800 billion infusion?

Because the first $400 billion disappeared. That’s how much the state budgets were under water for 2009 and 2010. Most states are required to have a balanced budget. No revenues, no services. Despite the many political speeches about being frugal, budget cuts were only by a fraction of what was missing due to reduced income tax and sales tax collection.

I have a friend who is a legislator on the appropriations committee at the state level. They were apportioning the stimulus money as soon as it was passed. Ten billion for education? That’s ten billion less that the state has to find. Fifteen billion for highway construction? One more highway we don’t have to pay for.

So at least half of the stimulus money is going to maintain current spending levels. The biggest impact of the stimulus is that things aren’t a lot worse than they are. The states have mostly avoided massive layoffs of their own.

We can’t stimulate the recovery by lowering interest rates, as is customary. Rates are at zero, so have no place to go. So the other choice is another stimulus bill. That means borrowing more. That means printing more money. You can probably see where this is going.

As to my Mom, she probably gets more on her CDs and no COLA on her Social Security. Her finances are a wash. Not so for the rest of us.

3. Why do you want to depress everyone?

Let me make this plain. This is NOT a political blog. Nothing I’ve said here places blame or points fingers. We are talking about gravity. It is what it is, and the effect is there whether you like it or not.

I’m not making any of this up. I’m not saying whether health care reform is right or wrong. I’m not trying to pin it on this administration, or the last administration, or Wall Street, or indolent Americans, or the Chinese. Facts are facts. It’s gravity.

I do think that the Fourth Estate plainly likes this administration more than the last, and is more favorable in its coverage. I do think that the media across the board avoids complex and difficult issues, and this problem is very complex. I do know, for a fact, that most folks don’t want to think about living though more of the same when it comes to 2009.

So when the talking heads tell you things are getting better, examine the information, not the delivery. Is losing “only” 500,000 more jobs actually an improvement? Is a positive GDP by itself enough to bet your next expansion on? Be very, very critical of what you see and hear.

Don’t ask me whether to buy or sell stocks. I have no clue. I’m taking the time to write this because I want my clients and other business owners to pay attention and to be ready. You are ready if you are running your business the best you can. You may say that you are doing that now, but you will need to do better.

4. What is a business owner to do?

Getting back to the basics is a hackneyed phrase, and like most over-used sayings, has lost much of its meaning. Here is what you can focus on.

Cash
Cash may be the only thing you have to fall back on if you hit a bump in the road. Your credit line is likely to be reduced, and may disappear. At the very least, it will be a lot more expensive than it was.

Do not pay down debt. Unless you fear a loan call because you are breaking covenants, continue paying today’s low-interest notes over their term. $100,000 in cash will make that $5,000 note payment for 20 months if you run into trouble.

Profits
Maintain profitability at all costs. It is the only way to generate more cash. You may want to take out the profits for tax purposes, but be prepared to lend them back.

It’s hard to keep up margins in a brutal pricing environment. You have no choice. Back in the inflationary 80’s we cancelled all catalogs and price sheets. Every one of our 5,000 SKUs were “call for price.” No one liked it, but we didn’t have a choice.

Many of our members are making the tough decision to give up the demanding, high volume-low margin customer. Whether you can afford to do that is dependent on your fixed vs. variable costs.. If you have high variable costs, especially if you are in a service industry, you may be better off without them.

Employees
If you decide to drop marginal business, drop those variable expenses immediately. Don’t become a cheerleader for “we can replace it in time.” You probably can’t, and you are bleeding cash every day that you try.

It’s cold, but if you lay off people the likelihood is that most of them won’t be going very far. You can get them back if you need them.

The last 12 months have shown you who gets it and who doesn’t. Every one of my clients admits that they have employees who acted like the recession was someone else’s problem, or have found it a convenient excuse for underperforming. It’s time for them to go, and seniority isn’t a factor.

Every termination, whether voluntary or involuntary, is cause to reexamine job descriptions. You should have one of those WWII posters up, but this one says “Is this hire really necessary?” Can you split the job up? Can you do it with a part timer? Can you do it with TWO part timers? There are plenty of folks out there in that 17%.

If you haven’t frozen wages, think about it now. Offer to share some profit instead. If there is an employment tax for health care, you will be sharing the burden instantly.

Purchases
Every purchase should provide a long term cost savings. Start downsizing vehicles at every opportunity. It really isn’t a question of whether fuel will be vastly more expensive. It’s only a question of how soon? By the time everyone else wakes up, small vehicles will be selling at a premium.

When your technology vendor says it is time to upgrade, demand to know what you will gain. “Faster” isn’t a feature if the operator isn’t currently at maximum capacity. The business world turned Vista down flat, and got away with it. Even Microsoft is learning that the customer has power.

Green is nice, but frankly it is a self-imposed competitive handicap to those who don’t participate. If paying more for electricity that is supposedly wind-generated makes you feel good, that’s great. If you can afford to be uncompetitive because your costs are higher, better still. (For the other guy)

My responsibilities are first to my family, second to my employees, and third to my clients. I feel a responsibility to the planet and humankind, but only after I’ve taken care of the first three. Short-sighted, I know. So shoot me.

By the way. At the risk of sounding like an investment advisor, I wouldn’t buy commercial real estate just yet.

Sales
I’m finding that sales people are the worst when it comes to blaming the economy for their performance. That’s why I started the series on compensation.

It’s harder than it was. Just answering the phone isn’t selling. Closing takes twice as long, collecting takes three times as long, and you have to beat off four competitors to get a reorder. So what’s your point?

The tribes who eat well during lean times are the ones with the best hunters. If your hunters aren’t getting the job done, you have to invest in better ones. This is the toughest place to suck it up. You can’t afford to lose a single sale, so what do you do about the salespeople you have who aren’t doing the job, but whose absence may cause more lost sales?

You can reduce your profits to add capacity until you can fire someone. You can fire them now and try to save as much as possible. You can reduce their compensation and let them quit, while preparing to cover their production. There is no painless way to do it.

A hard decision, but we are in a profession of hard decisions., and a time of hard decisions. It won’t be the last one you make in the next couple of years.

And if this keeps you Awake at 2 O'Clock...well, join the club.